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global prices.
The minimum price has been reduced from US$0,85c per kilogramme agreed in March this year to US$0,75c with effect from yesterday.
“The new agreement has been necessitated by the drastic decline in the international lint prices as quoted by the Cotlook ‘A’ index from US$2,37c per pound at the end of March 2011 to US$1,64c per pound at the end of May 2011.”
This is according an agreement signed by farmer representatives and cotton ginners.
The adjustment followed a series of engagements among stakeholders.
The previous agreement had a clause with states that “in the event of a world lint market catastrophe, the parties will meet to review the position”.
So far, farmers have delivered close to 120 million kg compared to 44 million kg delivered during the same period last year.
It is estimated that cotton deliveries could reach 300 million kg this year although the yield might be affected by drought experienced in some part of the lowveld.
Commodity analysts said the international yarn market is currently under heavy pressure hence prices are likely to be on a downturn as a result of subdued demand from weavers and knitters.
Buyers of yarn are believed to be adequately stocked for now and are, therefore, reluctant to enter the market until greater price stability becomes discernible.
Similarly, lint prices are equally under pressure, as spinners can no longer afford high replacement costs to buy new stock at high lint prices given the fact that yarn prices are on a decline. In countries like Pakistan ginners are being forced to discount heavily on their lint stocks in order to stimulate buying interest.
And in China, stocks that had been previously bought at a higher price are being sold back onto the market at even lower prices which is having a negative impact on prices.