* Dry weather to hit production
* Farmers switching to food crops
By Elias Biryabarema
KAMPALA, Aug 12 (Reuters) - Production in Uganda's once-thriving cotton sector may fall to negligible levels in the coming years due to harsh weather, government neglect, volatile global prices and investor flight, industry players say.
Uganda was Africa's largest cotton producer until political instability during the 1970s saw output drop from a high of 500,000 bales a year to less than 20,000 bales in the 1980s.
By the 1990s, the state-controlled sector's liberalisation had helped yields rise again. But the global economic slowdown has hit demand and prices for cotton and other commodities.
World cotton consumption plummeted 10 percent last year, the biggest fall since the 1930s, experts say.
"The international market virtually collapsed with the global economic crisis that unfolded late last year ... It hasn't been easy for farmers," said Jolly Sabune, managing director of the regulatory Cotton Development Organisation.
"Global warming has seen many cotton growing areas in the country become drier and drier, and this is devastating the cotton crop," Sabune told Reuters.
Africa's lint sector contributes around 15 percent to world output. The industry is dominated by West African producers, especially Benin, Chad, Mali and Burkina Faso.
Uganda exported an annual average of 7,000 tonnes of cotton from 1990/91 to 1994/95, and an average of 25,000 tonnes after 1999/2000, according to government and World Bank data.
East Africa's third largest economy has a ginning capacity of 800,000 bales per year, but only five percent of cotton moves beyond the lint stage, a central bank report says.
NORTH KEY TO OUTPUT
In Uganda, reduced receipts and poor policy have seen some important investors pull out in recent years.
"Even Dunavant is currently mulling selling a big chunk of our assets and scaling down our operations because of the frustration with government policy," said Ravi Patel, managing director of Dunavant Uganda Ltd.
Many players say Uganda must do more for the sector.
"The government has not offered substantial support which has made the cotton sector less profitable and less attractive for investors," said Josephine Akia of Nogamu, an organisation that promotes organic cotton.
Disappointed by yields, some Ugandan farmers have switched to food crops to take advantage of strong regional demand. In the June-May 2008/09 period, food prices soared 27 percent.
"Food prices are luring large numbers of farmers to abandon cotton growing, and Uganda's output could drop to insignificant levels," said Benon Senono of Balawoli Cotton Ginnery Ltd.
Uganda's lint is exclusively roller ginned and is grown by an estimated 400,000 farmers. In 2008/09, subsidies to cotton farmers saw receipts grow 39 percent to $27.6 million from $19.9 million, and volumes over 89 percent to 22,500 tonnes.
Colin Poulton, a cotton expert at London's School of Oriental and African Studies (SOAS), said output would not vary much until Uganda could boost cultivation in the north, which had been wracked by a brutal insurgency until a few years ago. (Additional reporting and writing by Jack Kimball; Editing by Daniel Wallis and James Jukwey)