When media reports meet data: Developments in the cotton sub-sector in Malawi

A lot has happened since my co-author and I published results of a study on performance of cotton farming in Malawi we conducted in 2014. For example, the Nation newspaper reported that cotton farming was in a “free fall” in 2016. Zodiak Broadcasting Station said cotton farming was at its lowest in 2017 whereas CISANET complained about uncertainty in the cotton subsector in Malawi. As if that is not enough, ginners reportedly “threatened” to stop providing inputs to cotton farmers as the ginners  lamented about not gaining from their investment in the crop. It has further been reported that farmers only managed to produce 13 000 metric tonnes against a national demand of 250 000 tonnes in 2017.

Furthermore, the government seems to have reversed its belief that cotton could replace tobacco as the country’s main forex earner. In 2011, for example, the government invested about      US$6, 153 846.15 (in 2011 in US dollars) in a cotton subsidy whereby cotton farmers received free cottonseed and pesticides. For unknown reasons, the government seems to have decided the investment was not worth it, signaling a belief that policymakers think the cotton industry is not a good alternative to tobacco after all.

There have been reports of ginners closing shop due to low cotton production. Additionally, farmers are reportedly abandoning the crop due to very low farm gate prices. A contract farming intervention championed by Cotton Development Trust in Malawi seems to have completely failed with farmers and contractors accusing each other of moral hazard and shirking.

But, should we be worried with these reports and developments? Yes and no. Let us start by considering the no aspect. Consider figure 1 below. It summarizes seed cotton production in Malawi between 1963 and 2017. I have forecasted production to year 2028 and as the figure shows, if the current trend persists; the cotton sub-sector in the country is not necessarily in grave danger of collapse as the media reports.

production

Figure 1: Historical production of cotton in Malawi with forecasts to year 2028.

Source: Own analysis using Faostat (2018) data

Reading the graph crudely, farmer and ginner exit from the industry seem to have no effect on cotton output. Indeed, even with these developments, the trend of cotton output seems to be increasing over time. Figures 2 and 3 help to explain this phenomenon. Figure 2 summarizes historical performance of cotton yield in the country. The figure shows an upward trend of seed cotton yield over time, signaling some advances in farmers’ technical efficiency in cotton production. These gains in yield seem to be driving output growth despite some farmers and ginners exiting the industry. Such exits could be considered, therefore, as a structural transformation of the industry with less productive farmers abandoning the crop for other seemingly profitable enterprises like soy and groundnuts production.

yield

Figure 2:  historical yield of seed cotton in Malawi, with forecasts to 2028

Source: Own analysis using Faostat (2018)

The farmers that are remaining in the industry seem to be increasing the area of land they allocate to the crop (see figure 3). The trend of area under crop follows a positive trend over time. Forecasts of the area allocated to the crop shows a continued growth should this trend continue. Such an increase in land area under the crop would imply that farmers find investment in the crop profitable enough to motivate them to increase the area they use for cotton production.

area

Figure 3: Area under cotton between 1961 and 2017, with forecasts to 2028

Source: Own analysis using Faostat (2018)

However, the increasing land areas allocated to cotton does not only entail a farmer perception of the crop’s profitability. It also significantly drives up growth in cotton output. Literature on growth analysis suggests that crop output growth is a function of productivity, area of land under the crop, cropping systems and interactions of these factors. The interaction of yield and area effects on cotton output, with both experiencing positive growth, could therefore explain output growth amidst farmer exits from the cotton sector.

In light of the above, it is reasonable to not worry a lot about the current media reports about a cotton industry in danger of total collapse. If no radical changes take place in the industry take place, the sector is poised to grow in the foreseeable future. On the other hand, media reports of a collapsing industry can severely affect investment decisions in the sector. Like everyone else, farmers, ginners, policymakers and other stakeholders in the cotton industry may lose confidence in cotton and make decisions that may hurt the industry due to incessant stories of a failing industry despite empirical evidence showing otherwise. Therefore, it is important for the media to conduct proper analyses and consult cotton researchers about performance of the industry before publishing stories that may scare investors and other players in this value chain.

References

CISANET. (n.d). Retrieved from Civil Society Agriculture Network: http://www.cisanetmw.org/index.php/121-uncertainty-hounding-the-cotton-industry

Kenamu, E., & Phiri, M. A. (2014). Performance of Cotton Production in Malawi. Scholarly Journal of Agricultural Sciences, 4(3), 157-165.

Khombe, G. (2016, August 6). Ginners Abandon Cotton Farmers . Retrieved from Zodiak Online: https://zodiakmalawi.com/business-news/ginners-abandon-cotton-farmers

Khombe, G. (2017, May 12). Cotton Production at Lowest Level . Retrieved from Zodiak Online: https://www.zodiakmalawi.com/malawi-national-news/cotton-production-at-lowest-level

The Nation . (2016, December 15). Malawi cotton industry on free-fall. Retrieved from The Nation : http://mwnation.com/malawi-cotton-industry-on-free-fall/

 

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