PATCHY IN­DUS­TRY

Finweek English Edition - - Economic Trends & Analysis - JO­HANN VAN ZYL jo­hannv@fin­week.co.za

THE CUR­RENTLY high global prices for agri­cul­tural prod­ucts have fi­nally fil­tered through to the cot­ton in­dus­try, ac­cord­ing to the lat­est price model from the In­ter­na­tional Cot­ton Ad­vi­sory Com­mit­tee (ICAC). The model pre­dicts an av­er­age Cot­look A in­dex of US$0,83/lb for 2008/2009, 10c (13,7%) more than the pre­vi­ous sea­son and the high­est av­er­age in 13 years.

The ICAC at­tributes that partly to a 5% lower world sup­ply of 24,9m t, largely as a re­sult of good prices of other crops that make it at­trac­tive for cot­ton pro­duc­ers to leave the in­dus­try.

Hen­nie Bruwer, CEO of in­dus­try or­gan­i­sa­tion Cot­ton SA, says the cot­ton price in SA also looks much bet­ter than it did a year ago – and es­pe­cially two years ago. The av­er­age price in the first week of Au­gust was 1 318,55c/kg, 14,2% higher than last year’s 1 154,76c/kg and 40,1% bet­ter than the 937,91c/kg of two years ago.

How­ever, whether that will be suf­fi­cient in­cen­tive to urge SA’s grow­ers to in­crease their cot­ton plant­ing is an open ques­tion. “Ac­cord­ing to the sev­enth es­ti­mate for the 2007/2008 pro­duc­tion year, SA’s har­vest could to­tal 52 394 bales of fi­bre, which would mean a 7% de­cline from the pre­vi­ous sea­son’s crop.”

Bruwer says the ex­pected crop will be the small­est in 40 years, mainly due to the per­cep­tion that cot­ton farm­ing is no longer vi­able in the light of the more favourable prices for other sum­mer crops. Cot­ton is fac­ing stiff com­pe­ti­tion from maize and sun­flower par­tic­u­larly, where prices have now been high for more than a year. In ad­di­tion, hand­picked cot­ton is ex­tremely labour in­ten­sive and has there­fore un­der­gone rel­a­tively larger cost in­creases ow­ing to the rapidly ris­ing cost of labour.

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