Online Reporter
Edgar Vhera
Agriculture Specialist Writer
Buyers purchased 401 tonnes of cotton at an average price of US$223 per tonne following the convergence of cotton seed bids and offers at the Zimbabwe Mercantile Exchange (ZMX)’s pilot trading of the commodity this season.
This follows the Government’s recent decision to add cotton and its by-products to the basket of commodities to be traded under the ZMX warehouse receipt system (WRS) to aid in financial inclusion and price discovery following the gazetting of Statutory Instrument (SI) 173 of 2024, Warehouse Receipt Act (Chapter 18:25), substitution of schedule notice 2024.
ZMX chief executive officer, Mr Collen Tapfumaneyi said the pilot cotton seed trading followed the successful registration of suppliers and cotton merchants as potential buyers of cotton seed on the ZMX platform.
“Five depots were inspected and successfully registered by the registrar of warehouses and these were certified by ZMX, marking a major milestone for the project.
“After warehouse certification, warehouse receipts for the cotton seed were issued after the weighing and grading of the available cotton seed,” he said.
Statistics from ZMX show that no trade was recorded on the first day due to a price deadlock.
The second and third auctions had an average closing price of US$220 per tonne with the final pilot auction closing at an average price of US$223 per tonne.
A total of 401 tonnes of cotton seed was traded during these auctions, according to the figures.
Mr Tapfumaneyi said the ZMX auction platform effectively showcased the price discovery process, featuring the active involvement of both large and small merchants.
Participants provided positive feedback, demonstrating to ZMX that the industry is now prepared for full engagement with the platform after the next harvest, he said.
Agriculture expert and Stockfeed Manufacturers Association of Zimbabwe (SMAZ) executive administrator, Dr Reneth Mano said the introduction of the ZMX spot market auction system for cotton seed was a good move, which had been long overdue.
“The arrival of ZMX auction for cotton seed heralds a new era for cotton farmers, as it presents to farmers and Government new ways for organised cotton farmers associations to market their crop and unlock value, especially where the Cotton Company of Zimbabwe (Cottco) and other private cotton ginneries offer toll ginning services to cotton farmers.
“An appropriately structured ZMX auction system can offer cotton farmers the opportunity to interface directly with final buyers of the three tradable cotton products (bales of seed cotton straight from the field, bales of ginned cotton lint and tonnes of ginned cotton seeds) and get paid for their cotton products directly through ZMX auction system without burdening Treasury,” Dr Mano said.
Toll ginning of cotton bales at ginneries for a fee will allow organised cotton farmers to process their seed cotton into lint and cotton seed, both of which are internationally valuable and highly tradable products.
“When ZMX spot market auction floors are open to both domestic and global buyers, cotton farmers will secure globally competitive export prices for cotton seed of US$223 per tonne and for cotton lint US$1 656 per tonne free on board (FOB).
“When fully operational, the ZMX auction system has the potential to increase the net incomes of organised cotton farmers by 55 percent through selling ginned products directly to domestic and global off-takers,” he explained.
Dr Mano believes the making of ZMX the central domestic spot auction market for all cotton products was the global best practice and recipe for stimulating sustained market-driven growth in Zimbabwe’s cotton production.
