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Collapse of WTO tariff talks bodes ill for Zimbabwe farmers
ZimOnline
August 08, 2006

http://www.zimonline.co.za/headdetail.asp?ID=12626

NYANGA - As the first rays of the sun filter through this rugged terrain in eastern Zimbabwe, John Dandazi, his body almost drenching in perspiration, sits atop a roadside pile of neatly stacked cotton bales.

A former accounting clerk, Dandazi is taking a well-deserved rest. He was up at the crack of dawn, readying his cotton crop for transportation to the nearest market.

We are in the Nyamaropa area in Nyanga, 350 km east of the capital Harare and only a stone's throw away from the Zimbabwe-Mozambique border.

"With prayers and luck, I hope to get transport in the next three days to get my bales to the nearest cotton depot," he says, wiping sweat from his face and forearms with a tattered cloth.

He will, indeed, require lots of prayers to successfully ferry his harvest within his prescribed deadline to the depot at Nyanga Centre, 60 km away. A nationwide fuel crisis has driven traffic off roads.

"The producer prices we are getting are too low," says the father of four, who turned to cotton growing five years ago after losing his job in Harare.

He says he is hard-pressed to break-even this year, given the escalating costs of inputs and transport, depressed producer prices and runaway inflation - which, at close to 1 200 percent, is one of the world's highest outside a war zone.

"We're not consulted when these prices are calculated. It's unfair. We want and deserve more money," says Dandazi, who grows the crop on a four-hectare, sun-baked field.

Except in instances of government intervention, prices paid cotton growers are set by the two leading cotton ginners, marketers and distributors, the Cotton Company of Zimbabwe (Cottco) and Cargill Zimbabwe (Private) Limited.

A formerly State-run entity and publicly-held company since 1995, Cottco controls 70 percent of Zimbabwe's cotton market. Its competitor, privately-held Cargill Zimbabwe - controlled by United States-based global giant Cargill Inc - has a lock on 25 percent of the market.

Cotton grower prices were pegged at Z$3 500 per kg at the start of the marketing season in May last year. Prices were increased two months later to $5 000 per kg, but only after Reserve Bank of Zimbabwe governor Gideon Gono's intervention.

The closing price for the current selling season, slated to end in about three weeks, has yet to be determined. Zimbabweans use 30 percent of the 300 million kg of the annual cotton output, while 70 percent is exported.

Dandazi appeared oblivious during the interview with this correspondent of a devastating blow dealt the local industry by events that occurred a few days ago, thousands of kilometers away in Europe.

It is also perhaps true that a majority among Zimbabwe's 250 000 cotton growers who helped propel the crop into the top foreign currency earner in the past two years - raking in about US$150 million in export revenue annually - were unaware of the events in Europe and their implication to their livelihoods.

On 24 July, a few days before this interview, representatives of developed and developing countries meeting in Geneva, Switzerland, failed to reach agreement on ways to reduce trade tariffs and expand markets for agricultural products sold to rich nations by poorer ones.

Had the talks, held under the auspices of the World Trade Organisation succeeded, Zimbabwe's cotton industry would have benefited from low tariffs for their produce and expanded markets throughout Europe, North America and the Far East.

"Successful tariff reductions and expanded markets will create a bonanza for Zimbabwe's cotton industry," says an agri-business analyst. "Low tariffs should translate to fat profit margins for marketers and, ideally, thicker pay packets for growers."

While the talks' collapse inevitably led to finger pointing and blame apportionment among some participants, powerful interests that included agriculture lobby groups in the United States (US) worked tirelessly to torpedo the proposals.

In America, according to data from the US Department of Commerce, agricultural products and services constitute about 30 percent of annual exports which, perhaps, helps explain the strength of the farm lobby.

Bob Stallman, head of lobbyist group American Farm Bureau Federation, told the New York Times soon after the talks failed: "We are proud that the US stood up and held the line. No deal is better than a bad deal."

On average, the US government spends US$4 billion annually in subsidies to its cotton farmers, who run some of the most sophisticated, highly mechanised agricultural operations in the world.

Questions on American subsidies and lobbying efforts aside, what does the future hold for Zimbabwe's cotton industry - with or without a reduction on global trade tariffs?

John Wilson, a researcher with a United Kingdom-based, non-governmental organisation, Pesticides Action Network, has been bullish about prospects for the local cotton industry, especially among small-holder growers.

"Cotton growing is popular in Zimbabwe's dry areas because it is usually the only cash crop available," he says in a comprehensive study, Organic Cotton Farming in Zimbabwe, he prepared for the UK organisation.

Documenting a major shift since Zimbabwe's independence in 1980 away from large scale commercial cotton farming towards communal and small-scale growers, the study concludes that small-holder farmers "now represent 80 percent of the national cotton output".

The Zimbabwe Farmers Union (ZFU), which represents a majority of the small-holder growers, agrees. "Growers have been joining us in large numbers in recent years," says a ZFU official.

Data shows that small-holder growers contributed 57 percent of output during the 1980-81 season and 58 percent in 1990-91. This skyrocketed in the 1999-2000 season, when 74 percent of the national output of 356 000 tonnes came from non-commercial growers.

But growers grumble that they are not getting a fair share of revenue generated from their contribution. They suggest Cottco and Cargill Zimbabwe shortchange them by keeping much of the revenue cake.

This perception is echoed by one ZFU official, who declares: "They're making huge profits on cotton ginning and sales but the question is, 'Is everyone involved benefiting?' We're not convinced."

In the past, the companies' representatives have dismissed these suggestions as unfounded, asserting revenues are ploughed back to growers in the form of bonus and credit schemes in addition to regular reviews of growers' prices.

Cottco has registered billions of dollars in profits each year since its privatisation in 1995. Privately-held Cargill Zimbabwe does not publicly reveal its finances.

But for farmers like Dandazi in Nyamaropa, the best way to cope up in an environment that is far from certain is to psyche oneself into a wait-and-see attitude. While he has contemplated substituting cotton to grow other cash crops - sugar beans, paprika or sweet potatoes - he is so far keeping such plans in abeyance.

"It will be a difficult decision for me to abandon cotton which has supported me so far," he says, gazing forlornly on the deserted road.

"I can't foretell the future because circumstances change. I'll still be growing cotton in the coming season. I'm crossing my fingers growing costs will become stable while growers' prices rise." - ZimOnline

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