Negotiations over a new minimum cotton price broke down on Monday, with the companies that buy cotton from the peasant producers demanding a steep reduction in the price.
Hence the Mozambican government announced on Tuesday that it will subsidise the price of raw cotton by six meticais (about nine US cents) a kilo.
The 2019 price was 23 meticais per kilo for the first-grade cotton, and representatives of the producers wanted it to be kept at this level, if not increased. But the buyers proposed 18 meticais and said they could not go beyond 19 meticais.
The government had to solve this impasse, which it did by granting a subsidy. Speaking to reporters after the weekly meeting of the Council of Ministers (Cabinet), Agriculture Minister Celso Correia said the minimum price for the first-grade cotton in this year’s harvest will be 25 meticais, and for second-grade cotton 18 meticais per kilo.
But this money will not all come from the purchasing companies. They will only pay 19 meticais a kilo: the other six meticais will be a government subsidy. In other words, taxpayers will pay almost a quarter of the price the producers receive for their first grade raw cotton.
“As you know, cotton on its own does not provide an adequate household income in line with the households’ cost of living”, said Correia. “The agreement the government has reached with the companies promoting cotton is that in the next agricultural campaign (2020-2021), in addition to cotton, they will also step up diversification into other crops in these productive blocks”.
This diversification, the Minister claimed, would allow an increase in household income. The government would prioritise soya, sunflower and maize as alternative crops, to be sown under a system of crop rotation.
Correia believed that, with the rise in household incomes, peasant farmers would feel encouraged to continue producing cotton.
Over the years cotton farmers had always been below the poverty line, said Correia, “but our projection is that next year these households can get out of poverty, which is our main priority”.
Correia puts the cost of the new subsidy to the government at 240 million meticais a year. At six meticais a kilo, this suggests that the government expects 40,000 tonnes of raw cotton to be marketed this year.
