Transcript COTTON IN TANZANIA

COTTON IN TANZANIA
TRENDS, PERFORMANCE AND FUTURE
PROSPECTS
Joe C.B. Kabissa,
Director General, Tanzania Cotton Board
COTTON IN TANZANIA
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The leading cash crop in terms of the number of
producers estimated at half a million farming
households;
40% of the population depend on it;
Cultivated area: 300,000 - 500,000 ha;
Smallholder based and completely rain-fed;
Farmers generally practice low input - low output
approaches to production;
Output fluctuates in relation to rain and market price;
Offers great potential for increased GDP; exports;
farmer incomes and employment via textile
manufacturing;
MAP OF TANZANIA
Key:
Cotton Producing Areas
Quarantined Areas
COTTON CULTIVATION
HISTORY
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Cotton was introduced into Tanzania in 1904 by
the Germans;
Initial attempts to grow it as a plantation crop
failed;
Between 1954 and 1994, marketing institutions
were in a state of continuous change aimed at
enhancing production, processing and marketing
of cotton;
Reforms are still ongoing;
Present and future performance of the cotton
industry in Tanzania will most likely depend on
the impact of these reforms.
MAJOR REFORMS IMPLEMENTED BY
1994
Poor performance of an agriculture – led
economy up till the 1980s compelled the
Government of Tanzania to undertake: Price and trade liberalization;
 Privatization of production, marketing and
processing of agricultural commodities;
 Enterprise restructuring; and
 Macroeconomic stabilization.
These reforms sought to improve price
incentives for farmers in order to boost
agricultural production.
Some of the effects of policy reforms on the
performance of the cotton industry
Sub - sector performance
Prior to reform
After reforms
Supply response
weak
stronger
Payments to farmers
delayed
Prompt
% of FOB price paid to farmers
Less than 40%
Above 60%
Prices paid to farmers
Pan territorial and pan
seasonal
Vary in relation to transport
cost and quality of cotton
Input procurement
Interlocking transactions used
Problematic
Private sector participation
None
40 private organizations in
2007/08
% Market share of
Cooperatives
100%
Less than 5% in 2007/08
Role of MNCs
Non existent
Cargill, Paul Reinhart and
Olam
Competition between buyers
None existent
For volume rather than quality
Quality of cotton
High and with premiums
Low with discounts
Use of price risk management
tools
Yes
Just a few ginners
Challenges emerging after the
reforms
Declining seasonal input use;
 Declining quality of lint;
 Increased coordination
problems;
 Stagnating local
consumption of lint;
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A note on the textile industry
Some 20 mills convert lint into textiles;
 Relatively low quality printed fabrics such as
khanga, kitenge and bed linen are produced
for the local market;
 High quality fabric is imported for the export
– oriented garment industry;
 Age of technology and the integrated nature
of most mills limit production level, quality of
products and hence quantity of lint used;
and
 Rules of origin limit sales into the EU in spite
of the EBA facility.
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Tanzania’s Coping Strategies
A Development Strategy was adopted;
 Institutionalization of Stakeholders’
Meetings;
 Formation of the Cotton Development
Fund (CDF);
 Adoption of one zone – one variety
strategy;
 Roles the Tanzania Cotton Board
redefined; and
 Formulation of a Corporate Strategy.
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Cotton production trends
between 1992 and 2007
Seed cotton production
400,000
300,000
250,000
Total WCGA
200,000
Total ECGA
150,000
Grand Total
100,000
50,000
Seasons
2006/07
2005/06
2004/05
2003/04
2002/03
2001/02
2000/01
1999/00
1998/99
1997/98
1996/97
1995/96
1994/95
1993/94
1992/93
0
1991/92
Production (tons)
350,000
THE GLOBAL TRADE REGIME
Pursuit for an agriculture-led growth and
development strategy is being undermined
by a global trade regime characterized by:Commodity price instability,
 Declining commodity prices; and
 Deteriorating terms of trade.
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Under these circumstances agricultural
profitability and poverty reduction cannot be
achieved.
Future Prospects
To produce 1.5 million bales by 2010;
 To increase the proportion of cotton
processed domestically by new investments
in spinning, weaving and processing; for
production of continuity products such as
bed sheets, toweling and undifferentiated
garments such as t-shirts and knitted
underwear initially and fashion garments
later; and
 To restore Tanzania’s reputation as an
exporter of “WHITE GOLD”;
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A moral question!
Can these farmers ride the wave of
globalization or be swept by it? To date,
80% of total world cotton output is
produced by smallholders. Yet in spite of
their comparative advantage, they have
little hope of achieving higher and stable
prices because of policies in some EOCD
countries. Our farmers are being
perceived as being on their way out - a
price of progress! On what moral right?
THANKS FOR YOUR KIND
ATTENTION