An Investigation on the Effects of World Market Cotton Prices on the Profitability of Cotton Production (The Case of Chiredzi Communal Farmers, Zimbabwe)
The purpose of the study was to make a survey on the effects of world market cotton prices on the profitability of cotton production to communal cotton farmers in Chiredzi, Zimbabwe for the period from September 2012 to October 2013 in which there has been a wrangle between cotton farmers and cotton companies over lower returns on cotton production due to lower prices being offered by cotton companies to farmers. The objective of this study was to ascertain whether world market prices affect communal farmers' profitability of cotton production, to explore the benefits of continuing with cotton production, to assess the challenges faced by communal farmers in producing cotton, and to determine possible measures that need to be put in place in the cotton industry to mitigate losses resulting from the effect of world market prices.The researcher used a survey study as the research design. The population used to obtain information was from ten different villages around Chiredzi communal areas. Interviews and questionnaires were used for data collection. Sampling of the population was conducted using judgmental or purpose sampling method. The research found that world market cotton prices severely affect profitability in cotton production, it was also noted that with the current prevailing pricing system in the cotton industry, there are no substantial benefits in cotton production, cotton production is also lacking financial support and there are currently no measures put in place to reduce losses that may result from the effects of world market cotton prices. The researcher therefore concluded that there is a link between world market prices and profitability. The researcher recommends that cotton companies should also carry the burden of low world market cotton prices rather than passing it all to the farmers. Other financial institutions such as banks should take a leading role in providing farming loans to cotton farmers and government must intervene with the aid of providing subsidies in cotton prices in the event that prices are below production costs.