As a result of the dramatic decrease in the price of cotton over the last month, the Tanzanian government has announced that it will subsidise local cotton farmers to the tune of $9.5 million. Prime Minister Fredrick Sumaye indicated that this was the decision of the government last week as a result of the fall in cotton prices globally due to an oversupply recorded during the cotton season of 2004/5.
This subsidy will make history in the East African country, as it is the first subsidy that has ever been provided by the Tanzanian government. In effect the subsidy will allow Tanzanian cotton farmers to earn $2.5 cents more per kilogram than they would ordinarily have received. The cotton price in Mwanza, the centre of the Tanzanian cotton belt, was reduced last week to Tsh250 per kilogram.
Despite the move by the government, various members of the Tanzanian government, such as Dan Makanga, are wondering why the government took so long to make the decision. The cost of production for cotton is above 30 US cents in Tanzania, he said, but farmers are now being paid 25 US cents per kilogram mainly as a result of the oversupply in the global market. This fall of 5 US cents from the previous price of 30 US cents per kilogram follows a report by the International Cotton Advisory Committee that world cotton production in 2004/05 was forecast to be 800,000 tonnes above consumption. Global cotton stocks are estimated to be at 8.66 million tonnes. The growth in cotton production appears to be largely due to the massive deluge of cotton into the market by China. Global cotton production for this season grew by about 8 percent year on year – the highest growth rate in almost a decade.
Tanzanian farmers will still be bracing themselves for hard times ahead, with an estimated 7.8 million tonnes of cotton, out of the 28 million tonnes produced, being surplus production. Tanzanian cotton production has also increased dramatically to 500,000 bales this year, far higher than the 2003/04 yield.
Source: The East African (Nairobi) 11/08/04
