Cotton industry likely to incur 40bn/- loss

Cotton industry in the country may incur a 34 million US Dollars (over 40bn/-) loss this year as most ginners have been affected by fall of cotton prices, as a result of the current global financial crisis. Sources in the industry say that a good number of ginners have neither been able to sell their bales nor gin some 244,987 bales.

However, the fall of prices would not affect farmers because their cotton was sold to ginners/buyers at prices ranging between 400/- and 500/- per kilogramme of raw cotton before the financial crisis struck in October, this year. Only 384,260 out of the 642,925 bales of raw cotton bought and delivered to ginners have been exported, due to defaulting of external buyers.

The authoritative sources said that Tanzania, with 642,925 bales (116,369 tones of lint) sold at an average price of 77 US cents per pound could have earned 198 million US dollars (257bn/-). The industry is projected to incur about 40bn/- loss due to the fact that only 384,260 bales (69,551 tones of lint) were sold at 77 US cents and the balance 258,675 bales (46,820 tones of lint) would fetch 45 US cents per pound, according to the source.

Industry watchers observed that ginners’ failure to sell all their cotton meant they might not be able to repay their bank loans and interests in time and this worries respective banks. It has reliably been learnt that Tanzania Cotton Board has already written to the Ministry of Agriculture, Food Security and Cooperatives, briefing it on the situation in the industry. Other stakeholders have also expressed concern over the fate of raw cotton and unsold bales plus their security from spoilage and fire given the pathetic condition of some warehouses at ginnery compounds.

Since then cotton prices have been declining over the years from 75 US cents per pound in 1985/86 to 35 US cents. There is urgent need to process all organic cotton into garments at factories which can do that to add value and evade the un-remunerative export market of raw cotton, the stakeholders have said. There is also urgent need for more ginners to engage in selling their cotton on forward sales rather than spot market.

“Ginnery owners should upgrade their warehousing at ginnery compounds as well as at buying posts, in order to accommodate farm level storage of seed cotton for prolonged periods of time,” observed one stakeholder. It is also suggested that the Tanzania Cotton Association should reconsider to either construct or lease warehouses in the Far East, which would allow for timely dispatch of cotton to spinners so that it can be used to stock cotton in years of crisis.

The Minister for Agriculture, Food Security and Cooperatives, Mr Stephen Wassira said the ministry was aware of the situation and that the matter would be forwarded to the government for further action. “We know the situation and not for cotton alone but also for other crops. Yesterday (Friday) I had a meeting with various cooperatives and we discussed the matter,” the minister said when reached for comment yesterday.

China which accounts for over 40 per cent of global lint imports has resorted to cutting down imports by over 75 per cent because retailers in the USA which also consumes over 40 per cent of the global textile output could not get the necessary financing. The international merchants, who buy cotton from all over the world, including Tanzania, had to cut down their lint imports in order to accommodate these unforeseen developments.

Source:Dailynews-tsn