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June 18, 2012

If the price of cotton fell by more than 50% since you planted, would you bother to harvest your crop?

Farming is a business, various ‘experts’ constantly tell farmers, as if they didn’t already know.

Other ‘experts’ preach the religion of the free market to governments, warning them to resist the temptation to interfere in the pricing or marketing of crops.

Here’s a current, real world example of how it is neither easy nor straightforward for governments to leave small scale farmers completely to the whims of the market.

Global cotton prices have slumped this year. Farmers in an area of Zambia who took up cultivation of the ‘white gold’ cash crop are in deep trouble because this year’s selling price is as low as half of last year’s. This is obviously a calamity for them.

The economics of the crop are so bad this year that the cotton farmers in Bbondo ward are reported to be leaving their ripe crop un-harvested in the fields, with some considering burning it.

As ZANIS (news agency) reports, ‘The farmers have decided to suffer double loss by not harvesting the crop only to sell at a give-away price.’

They are being urged to at least harvest the crop for storage, possibly for a time of better prices. That sounds like perfectly logical advice, but it assumes that the farmer can afford to hire labor to harvest and store the crop. This assumption is probably invalid where the bottom has fallen out of the cotton market. An already indebted farmer (seed, pesticides, fertilizer) who has no prospect of recovering his costs and paying his debts, let alone making a profit, must ponder if it makes sense for him to sink deeper into debt to harvest a crop that is a write-off for him anyway, no matter what he does now. And even if he wanted, the usual sources of credit (inputs vendors, family or local loan sharks, etc) are probably largely closed off anyway in a situation where everybody knows how low cotton prices are.

Some of these farmers abandoned maize to grow cotton. Zambia’s maize bumper harvests of recent years have been great for the country’s food security, but surplus means the price for farmers aren’t so great. Although the maize price is controlled by government to try to strike a balance between affordable prices for consumers and a motivating price for farmers, this is not an airtight system.

When the market is flooded, the producer price drops, especially in remote areas where the power of government edicts is often only theoretical. The government may announce a minimum price, but whether they will come to your remote village to buy your maize at that price is something else altogether. You may have to sell to private sector middle-men, whose offered price will be much lower than the government price in a time of surplus.

So these farmers have lost in a number of disastrous ways. They encounter not just huge losses on their cotton, but many of them possibly ruin, or at least years-long hardship from an investment that went very sour. Even if they would like to salvage their crop by harvesting and storing it, they may not be able to afford the added labor costs/losses of doing so. It is a sign of how bad the situation is when a farmer who has tended his or her crop in harsh conditions for months contemplates cutting his losses by abandoning it!

For those farmers who abandoned maize cultivation to devote all their resources to cotton, the situation is even more grave. They put all their eggs in one basket so cannot count on at least some income from maize proceeds. If they had counted on the ‘extra’ income from cotton for purchasing their maize needs, they don’t have that money and they don’t have any household maize stocks to fall back on.

Well, that’s how business is. Sometimes you win big, other times you lose big. ‘Farming is a business,’ tough luck, better luck next time, end of story.

But it cannot be the end of the story for the government concerned. It must be seen to be doing what it can to soften the blow for the farmers.

A councillor in Bbondo ward ‘has called on government to intervene in the pricing process and consider the plight of cotton farmers by adjusting the cotton price upwards.’

The free market/IMF-type response to this is that governments shouldn’t interfere in the workings of the market by fixing or shoring up prices. (At least in poor countries-rich countries are allowed to suspend the religion of free markets when it suits them-subsidies, price various supports, etc.)

The government may not be able to save the situation for these farmers, but neither can it be seen to have completely abandon them simply because that is the free market gospel according to the IMF and others.

The farmers have learned some very expensive lessons which they will no doubt be incorporating into how they do things in future, but they are also in deep trouble now, not tomorrow.

At least the farmers hadn’t planted GM cotton, whose itnputs costs are far higher, and whose seed cannot be saved in case you don’t have the money to buy new seed the following season, as is likely the case for the cotton farmers of Bbondo ward. But with the Alliance for a Green Revolution in Africa (AGRA) on the loose and with a presence in Zambia, it may be just a matter of time before the famous/infamous ‘Bt cotton’ is introduced. It will be recalled that the higher (often borrowed) costs of growing GM cotton have caused many farmer suicides in India when things didn’t go according to plan.

When the selling price of your crop drops as much as it has done with cotton this year, the ‘old fashioned,’ scorned, ‘low-yielding’ non-GM seed currently in use may be remembered with much fondness for a bad year still giving them the possibility to battle on the following year. Ts he armchair agriculturalists in various salaried isalaists ethose who say it is

African Agriculture

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