Egypt's cotton industry faces crisis
Less than a month before the harvest of the cotton crop, the Egyptian government announced that it is raising its delivery price by LE50 ($14.3) per qantar (157.5 kilograms).
This decision was taken to bring local prices in line with international prices for cotton, which have been increasing this year. The delivery price for this season was originally set between LE340 and LE440 ($97-$125) per qantar.
"This decision comes a little too late," says Mohamed Idris, president of the Agricultural Cooperative Union, in an interview with Al Ahram. He said this increase should have been announced before the cultivation season to encourage farmers to plant the crop. "Were this price announced before the cultivation season, it would have made a difference in the areas planted," he added.
The area planted with cotton this year is only 520,000 acres, the lowest in 50 years. By contrast, during the 1950/51 season the area planted with cotton was 1.97 million acres - 21 per cent of Egypt's total cultivated area.
Idris suggested that rather than paying an extra LE50 per qantar of cotton upon its delivery, this money should have been given to the farmer during the cultivation season, if not in cash then in kind, in the form of fertilizers or pesticides, for example.
Idris explained that the cotton crop is no longer a strategic crop and many farmers are abandoning it to plant more profitable and less burdensome crops. For Idris those still cultivating the fiber-yielding plant should be assisted.
The lack of a clear and stable policy on cotton has resulted in the fluctuation of production. This season's crop is predicted to yield some 3.5 million qantars, a drop from last year's harvest of 6.5 million qantars. The decline is particularly dramatic in view of the fact that yields of the crop in 1998 were the best since the 1950s.
Any decrease in the crop reflects on Egypt's ability to export, thus giving the chance to other exporters, especially the US with its long-staple Pima cotton, to fill Egypt's niche.
"If we stop exporting for a year, as we did in 1995, we lose our niche in the international market," Idris warned. "The export of any product requires continuity and quality, not a hit-and-run strategy," he said. Following a relatively small harvest in 1995, the government decided to refrain from exporting any raw cotton to be able to meet the demand from the local mills.
But availability of the crop is not all what local mills have to worry about; the cost of the fibre is another issue. Fathi Nematallah, general manager of the Textile Syndicate, believes that an increase of LE50 to the delivery price is "too much" because the cotton was already too expensive for the mills.
While Nematallah acknowledged the farmers' interest in receiving a better price, he asserted that the difference in price should be borne by the agricultural fund, not by the mills or companies. The fund is run by the Ministry of Agriculture to subsidize certain crops, which have a low market price.
He explained that any increase in cotton prices is reflected in the price of yarn, rendering the Egyptian product less competitive in both local and international markets. According to Nematallah, until recently Egyptian yarn was 25 per cent more expensive than other cotton yarn sold in Europe and the US. Over the past three years the price of Egyptian yarn has been reduced by 10 per cent, bringing it more in line with international prices.
Once local demand is satisfied partly through imports, locally produced premium cotton can be guaranteed for export in order to prevent further deterioration of Egypt's share of the international cotton market. According to a study prepared by Imam Mahmoud El-Gamasi, deputy-director of the Agricultural Economy Research Institute, in 1999 Egypt exported 1.8 million qantars of cotton, a figure equivalent to only 27 per cent of the 6.6 million qantars it sold abroad annually during the period 1951-1961.
Premium cotton, which is the type produced in Egypt, represents five per cent of global cotton exports. According to El-Gamasi's study, average global production of premium cotton reached around 856,000 tons per year during the period of 1980-1999. Of that amount, export of premium cotton averaged 273,000 tons annually. –(Albawaba-MEBG)
© 2000 Mena Report (www.menareport.com)