What is of great concern to developing countries is the falling global price of the commodity over the last ten years with disastrous consequences on developing country farmers’ income and government export revenues. The last three seasons in Zimbabwe witnessed price wars between the farmer organisations requesting high prices and cotton merchants offering low prices for the commodity. During the 2003-2004 season farmers demanded Z$3000.00 per kg while the merchants were prepared to pay Z$ 1800.00 per kg . The impasse was only resolved after the intervention of the Government and the Governor of the Reserve Bank of Zimbabwe with a compromised price of Z$1900.00 per kg, clearly disadvantaging growers. This year the merchants are reportedly offering Z$1000.00 per kg far lower than the last season’s final producer price, while the farmers are demanding a much higher figure in order to cover the steep increases in inputs.

The polarised positions of growers and merchants are quite understandable. Inherently the two parties have potentially conflicting interests. Both parties are in the cotton business in order to reap a profit. The growers seek to maximise their farm incomes from producing the crop while merchants also want to make the most earnings from marketing the crop. Therefore for each party to achieve its objective, growers seek the maximum price that they can get from seed cotton while merchants are determined to buy the commodity at the lowest possible price. When the chips are down, i.e. the global price falling (which has been the trend over the last 5 years), then conflicts inevitably arise on fixing the producer price.

The cotton merchants base their price setting on the international price while the growers take into account the input costs of production. As alluded to already, the falling international price is at present well below the aggregate average cost of production such that compelling growers to accept it is tantamount to impoverishing them or forcing them to go out of business. At the national level price negotiations are not between two parties with equal negotiating powers. The merchants have more information, knowledge on cotton trade and above all are better organised than the growers. Furthermore, they have the funds earmarked for buying seed cotton from growers on behalf of multinational companies with whom they are regularly in contact on marketing conditions, therefore they can exert their influence to get maximum benefit from the transactions.

Internationally, the depressed cotton price is due to the United States (US) and to some extent European Union (EU) CAP subsidisation policies on agriculture, a subject of debate worldwide. The difference between the US and EU is that the former produces large exportable quantities that depress global prices whilst the latter reduces the export market for exporting developing country markets. Since the mid-1990s there has been a remarkable shift in the US policy from supply control programs to demand driven (especially export demand) resulting in overproduction of agricultural commodities that presses down global prices to levels well below the cost of production . In 2003 cotton was exported at an average price of 47% below cost of production . At present the US accounts for 40% of the world total cotton exports. The rich countries farmers are subsidised for the loss of potential income from the market, a practice that developing countries cannot do due to poverty. Empirical evidence provided by OXFAM International illustrates the disparities between rich and developing countries price support to farmers .

There is an almost immeasurable difference between the highest and lowest subsidy paid to farmers. During the cropping season2001/02, Spain subsidised its farmers to the tune of US$0.76/lb and Cote d’Ivoire could only assist its farmers with US$0.03/lb. In the case of rich countries the subsidies are in fact increasing with that of Spain having increased by 42% while the paltry support provided by developing nations has remained fairly static.

In the case of Zimbabwe there are no price support programs for the farmers. For the current season, the Z$1000/kg that the merchants are offering is over 13 times below the subsidy a Spanish farmer gets for every kilogram of cotton (s) he produces.

The practice of dumping, i.e. selling cotton below cost of production has two profound negative effects on developing country farmers. Firstly below-cost imports drive the farmers out of their markets if they do not have safety nets of subsidies and credit. Secondly, for exporting countries, the farmers find their traditional markets flooded by cheap subsidised cotton from the US. Recently Brazil took the US to the WTO Trade Disputes Court and won its case even after an appeal. It is a complex politico-economic issue involving rich and powerful forces that the cotton merchants themselves dare not challenge.

Unfortunately in Zimbabwe, the tendency is to shift the blame on the suffering peasants without taking into account the international dimension. The global price is taken as given by market forces. In this way the unfair trade distorting policies of the rich countries are not considered, thus the analysis wittingly or unwittingly tends to be biased in favour of the merchants at the expense of the livelihoods of the growers. There is actually a need for both parties to cooperate constructively as opposed to pushing one party to be a price-taker regardless of the prevailing conditions.

It is useless to punish one party in order to reward another. There is nothing senseless about asking for a fair price in order to remain in business. All what the farmers are requesting is a price that will enable them to recoup the costs of production under the present hyperinflationary conditions.