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Organised markets key to boost cotton

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Malawi needs to organise its cotton sector if it is to reap the opportunities that regional and global markets offer, according to a report released by the African Institute of Corporate Citizenship (AICC).

The report is prepared by the Cotton Unit of the AICC and is released quarterly focusing on the future prospects of the cotton value chain in Malawi.

Government through the Cotton Council of Malawi has earmarked production of 80,000 tonnes of cotton in 2016/17 season.

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But in the outlook, AICC notes that to achieve this target, there is need to have clear mechanisms in place to ensure that quality production inputs and seed are available to farmers on time.

In the absence of such mechanisms, AICC fears 2017 production is likely to mirror the 2015/16 season when less than 15,000 metric tonnes of cotton was produced.

The estimated area under cotton cultivation is 133,333 hectares which requires about 2,000 tonnes of seed.

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At the moment, about 35 percent of the required cotton seed is available in stock for consumption according to official reports.

AICC notes that the country will have to bridge the gap by sourcing the seed elsewhere before the onset of rains to achieve the target set.

“With declining yields and production levels, the country ought to devise strategies aimed at boosting cotton production in 2016/17 season. Currently, the major limitation to increase yields and production is limited access to production inputs by small holder farmers,” the report said.

While all effort is being made by government and other stakeholders in the cotton value chain to increase production, operationalization of production turn around strategies remain elusive.

In the next six months, cotton prices are expected to be relatively stable in nominal terms after an anticipated further drop until December, 2016 and will revert to average in the first quarter of 2017.

This is despite world cotton prices being under pressure from substantial high s tock levels and fierce competition from synthetic fibres.

“Generally, world cotton prices are expected to be lower than the average in both real and nominal terms. World production is expected to grow at slower pace than consumption in the next six months reflecting the anticipated lower price level resulting from the large global stocks that accumulated between 2010 and 2014. Stock-to-use ratio is expected to be hovering around 40 percent in 2017,” AICC said.

The Cotlook A Index is projected to decline marginally to $1.46 in 2016/17 from $1.49/Kg in 2015/16 as growth in demand for alternative fibres and pressures on China’s trade policies continue to sharpen world cotton prices.

The report notes that given these global cotton trade dynamics, African countries, including Malawi, are likely to benefit from the cotton export market if adequate and quality supplies are made available.

“Empirical evidence from demonstration programme that African Institute of Corporate Citizenship has been coordinating as a Secretariat of the now defunct Cot t on Development Trust showed yields as high as 1000 Kg/ha can be obtained by smallholder farmers when an input package was used coupled with good agricultural practices,” part of the report reads.

Demand for cotton is derived from demand for textiles which is influenced by several economic factors. Any sudden changes in the global economy would result into a corresponding change in textile consumption hence affecting market stability.

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