SPECIAL REPORT: Contract farming seen as solution to ailing cotton production

A farmer sprays thiodan in his cotton farm. Contract farming could entice more farmers to improve their production PHOTO BY COSMAS PAHALAH By Cosmas Pahalah, The Citizen Reporter Dar es Salaam. Though the government has firmly emphasised that contract farming is the way forward in cotton cultivation, there is still uncertainty as some stakeholders are yet to accept the new system. The disagreement between those who are for and those against the system was evident in a meeting of cotton stakeholders held in Mwanza recently. Looking at intricacies of the system, it is evident that it is geared towards assisting the farmers. It also seeks to improve the quality and quantity of Tanzania’s cotton at the international market. One wonders then, why do some people oppose it?  The problem might be that some of the stakeholders don’t want to invest. This system needs stakeholders, notably ginners, to invest extensively by assisting farmers during production. That is why during this season, ginners were asked to deposit Sh50 million each, so as to ensure availability of inputs to farmers.  It is this amount of investment which has put cotton stakeholders confused. Listening to those who are opposed to the system, it is evident that though they say that they are against it, in fact they are against investing. This is because inspite of their protests they concur that contract farming is beneficial, not only to farmers, but to them as well.  Ideally, contract farming is a private-sector transaction facilitating farmers and ginners in collectively investing in land, labour, credit, high-value inputs, education and technology for their mutual benefit. Here ginners form a “platform” from which rural Tanzanians may secure the means of production to transform themselves into productive cotton farmers.  This investment ensures increased production of high quality cotton. While farmers will be direct beneficiaries of the increased yield, ginners, on their part, would reap their benefits from the export of the high quality cotton. And the country will also benefit as it will be famed as origin of high quality cotton.  According to Tanzania Cotton Board Director General, Mr Marco Mutunga, due to negligence to assist farmers, cotton farming has taken a hit. This has led to low yields of down to 300km per acre while there is a possibility of producing up to 1,500kg per acre.    Speaking during another meeting in Dar es Salaam last week, Mr Mutunga also indicated that Tanzania cotton has been getting low prices at the world market due to its inferior quality. On average, Tanzania cotton is sold at between 4 and 6 US cents discount.  Lack of investment in cotton farming has contributed to inadequate research on the crop, Mr Mutunga says noting that coupled with low level of mechanisation and inadequate extension services, the crop, which had been the pride of Tanzania few years ago, has been going down at an alarming rate.  On the contrary, contract farming is aimed at turning this sorry state to prosperity, according to Mr Mutunga.  Some stakeholders who spoke in Mwanza were surprised that there were some people, especially those involved in cotton farming, who oppose the contract farming system, which, if used effectively, will redeem the crop which is depended on by more than 16 million people in the country. A warning has already been sounded that if something is not done to salvage the contract farming system, the crop, known as the white gold, would die as people look on. Its demise would not only affect millions of people from seven regions, but will also have a hit on the agriculture sector, in which it accounts for 25 percent. Because agriculture is the mainstay of the economy, this means that the country’s economy is also going to be affected.  A cross section of ginners speaking in Mwanza stakeholders meeting recently, warned that the cotton sub sector will fall into deep waters if contract farming is halted following a wide concerted opposition by some ginners.  Speaking at the Mwanza meeting, a representative of one of the major buyers of the produce, Jagan Gopinath of Olam Tanzania strongly advised that if the contract farming model for the cotton sector fails, it would be difficult for private investors to top up their stakes in the sector.  It was apparent at the meeting called by the government through Tanzania Cotton Association (TCA) that ginners that have invested billions in contract farming want the concept to go on while others who find themselves short of necessary funding, felt that they were being pushed out of the business because of the heavy investments required.  “The best way forward to increase productivity and quality of cotton produced in Tanzania is contract farming, which is win–win for all. It enables the stakeholders including the government to keep a watch at the whole value chain.  It is the only viable way. I am telling this based on our experience in Zambia, Ghana, Mozambique, Zimbabwe, and Ivory Cost,” said Mr Jagan Gopinath. He added that it is contract farming that has revived cotton successfully in Mozambique, Zambia, and Zimbabwe. Added Mr Gopinath: “This is going to be the same case in Tanzania, but if we allow the non investing ginners to conduct a free for all buying without supporting farmers with inputs, we will be taking steps backwards.” Sunday Mtaki, a consultant to the cotton industry, also felt that a lot of efforts invested to revive the crop will be futile if cotton farming is thrown out and the nation will have to go back to the drawing board.  “Without implementation of contract farming, Tanzania’s cotton sector will be in peril. Record levels of planted acreage achieved this season will not be repeated as without organised support of  ginners in securing and distributing significant levels of inputs on a credit basis, farmers may not be able to make it,” said  the chief executive officer of  Singida-based Biosustain Ginnery, Dr Riyaz Haider.  While others are hesitant, about 13 ginners and four cooperative unions have already invested in contract farming and facilitated distribution to farmers of most of the record quantities of pesticide and about 30,000 tonnes of seeds.  The contract farming system, which is supervised by TCB, is coordinated by the Cotton Development Trust Fund (CDTF), a private-sector agent facilitating input procurement on behalf of farmers, ginners and the TCB.  The investment and other actions of these 17 ginners and coops have supported the lion’s share of a record amount of acreage devoted to seed cotton production (estimated at nearly 1.4 million acres this season).  Despite the achievement, farmers groups said there was still a shortage of inputs. Last year, these same 17 ginners and coops purchased over 80 per cent of the crop while still reporting significant under-utilisation of their ginneries.  This season, they have signed production contracts with nearly 4,000 farmer business groups (FBG) comprising nearly 250,000 Tanzanian cotton farmers.  In contrast, about 18 ginners who have not invested in contract farming have signed production contracts with only about 1,000 FBGs representing less than 80,000 farmers.  Despite not having invested in the system, these ginners have distributed only a small fraction of seeds and pesticides in this season. Ginners supporting contract farming want the government to maintain an enabling environment for investment by maintaining the rules of contract farming as stipulated by the TCB as they feel that allowing “free rider” ginners, who have not invested in contract farming, will just kill the sector. Some non-investing ginners want free riders to buy the crop from anyone, which encourages side buying from contracted farmers and leads to lowering the balance of scale.  Accordingly, if the ability of invested ginners to collect on loans extended to farmers is inhibited by government’s licensing of “free-riding” non-investing ginners, then investing ginners cannot be held accountable for their input-related obligations.  Implementation of contract farming has been opposed to the Minister of Agriculture, Food Security and Cooperatives by a group of ginners, who have failed to invest in contract farming as stipulated by the TCB.The 18 ginners that have not invested in contract farming this season purchased only about 17 per cent of last year’s crop.  Several of these 18 ginners are currently on the “default list” of the International Cotton Association. Some have managed to negotiate and removed from the list and are now paying European buyers for them to be able to continue with the business. Inclusion on such list indicates that these ginners have defaulted on significant contracts with international cotton traders and that these ginners will not likely be able to access international cotton markets in selling the product of whatever level of seed cotton they might purchase if licensed. Here it is not only the reputation of the ginners which is in line, but also Tanzania fame as a producer of quality cotton is at stake. Furthermore, continuing inclusion of these defaulting ginners in Tanzania’s cotton sector may be detrimental to the sales efforts of Tanzania’s non-defaulting ginners among international cotton buyers.  This situation calls for immediate government intervention. To abandon contract farming seem not to be good option as it will increase the risk of demise of the crop.   Failure of Government to act to uphold the rules of contract farming will result in significant hardship for Tanzanian farmers.  For his part, TCA Chairman Mwita Gachuma, speaking during the Mwanza Stakeholders meeting, called upon ginners that have not yet invested in contract farming to meet their related obligations immediately. He said their failure to do so would mean that they were not going to be licensed to buy cotton this season. “We hope that our colleagues will appreciate the grave situation we are in and do something to rescue cotton which supports millions of people and accounts for substantial percentage of agricultural economy in the country,” he said.