Cotton industry to adopt contract farming system
Tanzanian cotton industry stakeholders have, beginning this season, resolved to embark on contract farming as a way of rescuing the industry from the brink of collapse.
Presenting a paper on the implementation of contract farming to ginners, district commissioners as well as agricultural officers, during a two-day meeting that ended on Friday, Mr Mtunga said cotton dealers who did not have ginneries would not be licensed to trade in cotton in the new model.
“Throughout history, cotton production in Tanzania has been faced with low productivity, poor cotton quality and a low level of mechanization that has resulted in demoralization of cotton farmers, who started opting for alternative cash crops such as tobacco,” he said.
Through contract farming, this trend will be reversed because the model guarantees farmers inputs, marketing as well as a stable price and income since contract farming demands ginners to pay upfront upon delivery, he added.
Contract farming will also see agents barred from cotton trade to depart from the past practice where contact between ginners and farmers occurred only at the time of farming, a situation that contributed to poor cotton quality and low production.
According to Mr Mtunga, contract farming will directly link ginners with cotton growers whereby ginners will work with growers, from ploughing to pricing. He said last year cotton stakeholders resolved that only ginnery owners should be licensed to engage in contract farming.
In order to be licensed, ginners are required by the resolution which will be signed into a regulation by the minister for Agriculture any time soon. It would also include the requirement that they also employ a minimum of five extension officers.
Ginners are also required to provide loans to farmers for inputs which will be offset during the selling season between the farmers and the ginner, who shall retain the sole right to purchase the cotton which they have invested in.
Mr Mtunga said that through the Cotton Development Trust Fund (CDTF), money would be collected from ginners in advance and inputs would be procured in bulk and would later be allocated proportionately to ginners who will distribute them to farmers.
“The point here is to make cotton dealers invest so that they become directly involved in the industry rather than be mere traders of the commodity which in the end leads to poor yields and quality,” he said.
Contract farming requires that farmers form business groups of members between 50 and 70 who are registered with the Business Registration and Licensing Authority (Brela). The Farmers Business Group will also operate as agents for produced cotton and ginners will now pay the commission that once went to agents directly to farmers through FGBs.
Presenting a paper on the formation of Farmers Business Group (FGB), Mr Onesphore Karuho, project manager Technoserve who provides technical services in contract farming said FGB will be independent business entities with leadership empowered to make marketing, investment and production-related decisions on behalf of their respective membership.
“The support of and personal engagement of regional commissioners and other regional level officials is considered critical to the FGB formation efforts and ultimately to the successful implementation of contract farming,” he said.
In his presentation, Mr Mtunga told delegates that the Cotton and Textile Development Programme has set aside Sh1.3 billion for the formation of FGBs.
According to him, due diligence would be conducted to the existing ginners to ascertain their financial capabilities as part fulfillment for licensing them to engage in cotton trade.
He said so far a two-year pilot study on contract farming has been conducted in Mara Region and already 72 per cent of cotton farmers of the targeted 50,000 in WCGA for the 2010/2011 season had joined contract farming. Contract farming would be monitored by the TCB in order to safeguard the interests of both farmers and ginners.
By Ray Naluyaga, - The Citizen
