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Cotton Farmers and Out-grower Schemes

 

There are currently 9 out-grower/ginning companies (information provided below in tables 2 &3 and figures 1 & 2) operating in the country.  Cotton out-grower companies operate with a distributor model (whereby local agents/distributors are commissioned to link ginners to the farmers) or centralised model (whereby ginners’ own staff deal direct with the farmer). Cargill operatesthe centralised model and Dunavant uses the distributor model.

 

Pre-season, local agents, distributors and ginners’ field personnel encourage smallholder farmers to sign contracts to produce seed cotton for the ginneries. Most farmers receive inputs on credit. It is common practice for the input prices to be inflated to cover the ginners’ financing, distribution and extension costs. Self-financing farmers are able to buy inputs at significantly lower prices. Unlike most other African countries, the Zambian cotton sector has no agreed transparent guide price for the harvested seed cotton. In practice, the tied cotton farmers take most of the commercial risk. When world prices are low farmers may earn very little for their labour. When world prices are high the ginners takes most of the profit. The ginner dictates the price on a take it or leave it basis!

 

Table 2: Outgrower information

 

Company name

No. of farmers

Hectares

Yield

2010

2011

% change

2012

% change

2010

2011

% change

2012

% change

Kg/ha

2012

Dunavant

73,383

104,106

42

169,406

63

92,660

106,020

14

189,198

78

542

Cargill Zambia (2009)

36,427

63,465

74

95,005

50

43,233

69,310

60

119,499

72

655

Chipata Cotton Company

46,800

28,197

-40

64,413

128

46,800

26,868

-43

61,500

129

450

Continental Ginneries /Olam (Z) Cotton

15,458

36,167

134

53,525

48

17,570

44,112

151

78,358

78

418

Alliance Cotton Ginneries

19,582

32,200

64

49,791

55

20,000

32,951

65

55,870

70

452

Agriculture Science & Tech. Co. Ltd.

 

 

 

6,395

 

 

 

 

7,157

 

615

Yustina Cotton & Oil Company

4,000

 

 

700

 

8,000

 

 

2,200

 

491

Zhonghe Investment Corporation

 

 

 

406

 

 

 

 

530

 

434

Africa Cotton of Zambia

 

2,087

 

 

 

 

2,428

 

 

-100

 

TOTAL

193,894

266,222

37

439,641

65

230,648

281,689

22

514,312

83

529

Source CBZ 2012

 

Dunavant and Cargill dominate the sector with over quarter million farmers, or 60% of all cotton farmers, engaged in their out-grower schemes. Over many years, both companies have received donor finance to support their extension models. Unfortunately, seed cotton yields have remained stubbornly low with Dunavant-linked farmers at 0.542tons per hectare and Cargill at 0.655 tons (CBZ data from ginner returns 2011/2012).

 

 

These two ginning companies purchased 2/3rds of all the seed cotton produced during the season.

 

Based on ginning companies’ returns to the CBZ the current average yield per hectare is only 529kg. This is broadly in line with ICAC cotton lint market intelligence. There appears to be a marked disparity between information supplied to donor groups and data supplied to the public body.

 

Figure 1: Cotton farmers/ginner                    Figure 2: Seed cotton purchases 2012

 

 

 

 

In 2011, Chipata Cotton Company experienced significant problems during the production cycle. This resulted in low output. Fuzzy seed accounts for circa 60% outputs, i.e. ginning out-turn (GOT) of 40% to 42%.

 

Fuzzy seed is an important contributor to ginnery profitability

 

 

 

 

 

Table 3: Cotton Lint & Fuzzy Seed Volumes Per Ginner in 2012

 

During the 2011/12 season, twice as many farmers grew cotton than cultivated the crop during the 2007/08 season. However, there was no change in average hectares planted by each farmer. The low yield per hectare and small crop are key factors that suppress cotton farmers’ incomes. 

 

Since most farmers are dependent upon input credit from ginners, they have little or no negotiating power. During the 2011/12 season, farmers were frustrated by the lack of movement on seed cotton prices and the intransigent position of the ginners who refused to increase prices even when challenged with reliable and current market intelligence supplied by a renowned international expert.There is a significant financial incentive for the ginners to suppress prices.