Economic Analysis of Factors Affecting Cotton Production In Zimbabwe

Improving cotton production is undoubtedly one of the greatest challenges facing the Zimbabwean government today. Since cotton is an important cash crop for the country and for individual households, it has important implications for livelihoods of rural people. In order to achieve this, several interventions in the sector were done since independence in an attempt to improve production. The main objective of this thesis was to identify factors affecting cotton production in the country during the period 1965-2005.Nerlovian supply response function was used to conduct the study. Empirical findings reveal that the major factors were government expenditure on research and extension and short-term credit extended to farmers by commercial banks and Agribank.The elasticity of supply response with respect to research and extension was 0.17 and 0.4 in the short-run and long-run respectively. The elasticity of supply response with respect to agricultural credit was found to be 0.32 in the short-run and 0.74 in the long-run. Simulation experiments reveal that a 10 per cent increase in the provision of short-term credit will result in a 3.2 per cent increase and 7.4 per cent increase in area planted to cotton. And also it was found that a 10 per cent increase in government expenditure on research and extension will result in a 1.7 per cent increase in area planted to cotton in the short run and 4 per cent in the long run. The study also documented low elasticities of supply response with respect to own price and that of competing products (maize in this case). A comparative analysis of domestic and international cotton marketing reveal that there is some relationship between the two markets. A Spearman correlation coefficient of 0.72 was found between world price (Cotton-A Index) and the domestic lint price expressed in US dollars and was significant at 1 percent. Nominal protection coefficients were also computed for the period and it was found that the degree of protection in the domestic sector was declining over the years, but generally farmers have been taxed. Important policy messages from the empirical findings were that there is need for the government, private sector and NGOs to increase extension and training programmes to farmers and also they should continue to lobby for scrapping of policies in the developed world that depress lint prices in the world market. It was recommended that measures should be put in place that enables financial institutions to increase their provision of credit to cotton farmers. Empirical findings also reveal that in the presence of some institutional mechanisms, policies that have negative effect( producer price fall) on production, cotton production will not fall as much than in the absence of such institutional mechanisms.