**Table 20: International cotton prices**

|||**USD**|||**MWK**||
|---|---|---|---|---|---|---|
||Dec 06|Oct 07|June 08|Dec 06|Oct 07|June 08|
|Cotlook Index A (per lb)|0.59|0.68|0.78|83|95|109|
|**Conversion to metric tons**|**1,309.18**|**1,492.11**|**1,719.12**|**183,285**|**208,895**|**240,677**|
|Less sea freight to Nacala (per MT)|210.00|220.00|230.00|29,400|30,800|32,200|
|Less road freight to Blantyre (per MT)|68.00|85.00|96.00|9,520|11,900|13,440|
|Less road freight to Gin (per MT)|19.20|24.00|32.00|2,688|3,360|4,480|
|**Malawgingate lint revenue(fobper MT)**|**1,011.98**|**1,163.11**|**1,361.12**|**141,677**|**162,835**|**190,557**|

Domestic road freight = MWK 12 per km in 2006; MWK 15 per km in 2007; 20 per km in 2008.

88. In analyzing the cotton value chain, we considered two production levels differentiated on the basis of low and high management as shown in Table 21. Low management implies use of un-treated seed, no application of fertilizer and limited use of pesticides. High management implies use of treated seed and application of fertilizer and chemicals at the recommended rates. In both scenarios, both hired and family labor is used since almost all the cotton in Malawi is produced by smallholder farmers. The analysis assumes a ginning-out-turn (GOT) of 38.5%.

89. The farm-level cost elements for cotton include labor, fertilizer (for high management), chemicals, marketing costs and depreciation of the capital equipment such as sprayers. At the high input level, it is assumed that the ginner makes an additional investment in improved extension and other out-grower services beyond the very basic types of support offered now. Specifically, it was assumed that at the (current) low-input level, the ginner spends only USD 1.02 per hectare (equal to MWK 239 or USD 1.71 per MT seed cotton) whereas at the improved, high-input level the ginner invests and estimated USD 5.53 per hectare (equal to MWK 861 or USD 6.15 per ha per MT seed cotton) on farmer extension and other out-grower services.

**Table 21: Cotton assumptions**

|**Sector**|**Yield**<br>**(MT/Ha)**|**Farm**|**Assembly**|**Process**|
|---|---|---|---|---|
|FAM-low|0.6|Fuzzy seed, no fertilizer,<br>limited pesticides with<br>hired sprayer, 118 days<br>labor<br>(93 daysfamily)|50km from rural depot<br>to ginnery|38.5% GOT|
|FAM-high|0.9|Treated seed, 1x1 fertilizer,<br>recommended pesticides,<br>own sprayer, 123 days<br>labor(83 daysfamily)|(vertically integrated<br>operation managed by<br>ginner/outgrower<br>company)|(parity price<br>comparison for lint at<br>gin gate, excluding<br>revenue from seed)|

Fertilizer use expressed in 50kg bags basal (NPK) x 50kg bags top dressing (urea) per ha.

|**MK per MT**|**USD per MT**|**Product Form**|**Location**|
|---|---|---|---|
|**Farm gate price**<br>63,830|455.93|Baled seed cotton|Farm depot|
|**Assembled raw material**<br>65,469|467.64|Baled seed cotton|Into ginnery|
|**Ex-factory price**||||
|Lint<br>162,835|1,163.11|Lint (38.5%)|ex Ginnery|
|Seed<br>10,500|75.00|Seed (57%)|ex Ginnery|
|Trash<br>-|-|Trash (4.5%)|ex Ginnery|

90. The analysis also took into account the Government of Malawi (GOM) minimum seed cotton price in 2007/08 which was set at MWK 65 per kg with 2-3% deduction from gross sales 42