Egyptian Cotton in Peril as Exports Slide
Deya Abaza
Wednesday 15 Jun 2016
Exports of world-famous Egyptian cotton have dropped sharply as years of neglect and recent government spending cuts have taken their toll.
Exports dropped by almost a quarter in the first half of the current marketing year, which starts in September, compared to a year earlier, figures released by state statistics agency CAPMAS showed.
Egypt sold 236,300 qintars on the world market between September 2015 and February 2016, down from 308,800 during the same period of the previous year.
"This has been one of the worst years for Egyptian cotton, if not the worst," Ahmed El-Bosaty, chairman of the Modern Nile Cotton trading company, told Ahram Online.
Lax enforcement of regulations during the turmoil that followed the country's 2011 revolution has led to mixing premium long-staple strains of cotton with cheaper ones. Seeds of different qualities were also jumbled together in the ginning process, says El-Bosaty, further compromising the premium quality demanded by buyers overseas, as well as makers of luxury cotton products at home.
Ever since the days of the British occupation of Egypt, cotton varieties had been carefully segregated, with the government assigning different varieties to different geographical areas and ginning different types of cotton separately to ensure purity.
The country has had seven different ministers of agriculture since the uprising which toppled the Mubarak regime, one of whom was recently sentenced on corruption charges.
The decline in cotton exports can only exacerbate Egypt's foreign currency crunch following years of instability and weak FX receipts from tourism, workers' remittances, foreign investment, the Suez Canal, and other exports.
In the years following the revolution, the value of Egypt's raw cotton exports plunged from $221 million during the 2010/2011 fiscal year to $42.5 million in 2014/15, according to Central Bank of Egypt data.
"It reached a point where cotton traders' contracts that have been registered will not be executed because we were not meeting the criteria for long-staple cotton," El-Bosaty said.
Egypt has contracted to export 27,710 tons of cotton, or 554,200 qintars, so far this marketing year, said El-Bosaty. Seventy-four percent of the quantities contracted have been shipped, he added.
El-Bosaty estimates that the majority of the exported cotton came from the previous year's stockpiles.
"All our foreign buyers refused to buy any of this year's production, we sold roughly 600,000 qintars that were leftover from the previous year," said Nabil Santarisy, President of the Alexandria Cotton Exporters’ Association (ALCOTEXA).
The lifting of a decades-old state subsidy to cotton farmers before the sowing season last January drove many growers to less costly and more profitable crops such as rice, which offered attractive margins as its local price doubled significantly at the same time, said Santarisy.
The subsidy of EGP 1,400 per feddan (1.038 acres), equivalent of EGP 350 per qintar according to then-minister Adel El Beltagy, was eventually replaced by another that was linked to the selling price of cotton to the local spinning industry.
The state-owned Holding Company for Textile Weaving and Spinning is buying 85 percent of the year's premium variety crop for EGP 1,300 per qintar.
The government of President Abdel-Fattah El-Sisi, which aims to cut the budget deficit from 11.5 percent to 9 percent in the coming fiscal year, is offering lower prices this year, including EGP 1,250 for the longest staple Giza 86 and Giza 87 varieties. This comes even though the Egyptian pound has weakened by 14 percent against the dollar since the start of the year and has fallen further on the black market.
The ministry of agriculture has also failed to make new, higher yielding varieties available to cotton farmers in recent years, said Santarisy.
The total area planted with cotton in 2015 was 121,195 feddans, according to Cotton Arbitration and Testing General Organization (CATGO). This is expected to be halved this year, according to El-Bosaty, and the 2016/2017 harvest is projected to be the most meager in the history of Egyptian cotton.
Until the 1980s, Egypt cultivated as much as half a million hectares (1.2 million feddans) of cotton a year to meet global demand for luxury Egyptian cotton.
But technological advances and consumer preferences over the years has drastically reduced demand for the high-end product, with world consumption of long staple cotton currently accounting for just 2.5 percent of the total according to a United States Department of Agriculture report released last week.
The silver lining is that this may halt the decline in the quality of the cotton, says El-Bosaty.
"The smaller the area, the more you can control the quality," he says, stressing that newly salvaged pure long staple seeds were made available to growers this year.
* 1 qintar equals50 kg of cotton lint or 157 kg of cotton
http://english.ahram.org.eg/News/223060.aspx
Wednesday 15 Jun 2016
Exports of world-famous Egyptian cotton have dropped sharply as years of neglect and recent government spending cuts have taken their toll.
Exports dropped by almost a quarter in the first half of the current marketing year, which starts in September, compared to a year earlier, figures released by state statistics agency CAPMAS showed.
Egypt sold 236,300 qintars on the world market between September 2015 and February 2016, down from 308,800 during the same period of the previous year.
"This has been one of the worst years for Egyptian cotton, if not the worst," Ahmed El-Bosaty, chairman of the Modern Nile Cotton trading company, told Ahram Online.
Lax enforcement of regulations during the turmoil that followed the country's 2011 revolution has led to mixing premium long-staple strains of cotton with cheaper ones. Seeds of different qualities were also jumbled together in the ginning process, says El-Bosaty, further compromising the premium quality demanded by buyers overseas, as well as makers of luxury cotton products at home.
Ever since the days of the British occupation of Egypt, cotton varieties had been carefully segregated, with the government assigning different varieties to different geographical areas and ginning different types of cotton separately to ensure purity.
The country has had seven different ministers of agriculture since the uprising which toppled the Mubarak regime, one of whom was recently sentenced on corruption charges.
The decline in cotton exports can only exacerbate Egypt's foreign currency crunch following years of instability and weak FX receipts from tourism, workers' remittances, foreign investment, the Suez Canal, and other exports.
In the years following the revolution, the value of Egypt's raw cotton exports plunged from $221 million during the 2010/2011 fiscal year to $42.5 million in 2014/15, according to Central Bank of Egypt data.
"It reached a point where cotton traders' contracts that have been registered will not be executed because we were not meeting the criteria for long-staple cotton," El-Bosaty said.
Egypt has contracted to export 27,710 tons of cotton, or 554,200 qintars, so far this marketing year, said El-Bosaty. Seventy-four percent of the quantities contracted have been shipped, he added.
El-Bosaty estimates that the majority of the exported cotton came from the previous year's stockpiles.
"All our foreign buyers refused to buy any of this year's production, we sold roughly 600,000 qintars that were leftover from the previous year," said Nabil Santarisy, President of the Alexandria Cotton Exporters’ Association (ALCOTEXA).
The lifting of a decades-old state subsidy to cotton farmers before the sowing season last January drove many growers to less costly and more profitable crops such as rice, which offered attractive margins as its local price doubled significantly at the same time, said Santarisy.
The subsidy of EGP 1,400 per feddan (1.038 acres), equivalent of EGP 350 per qintar according to then-minister Adel El Beltagy, was eventually replaced by another that was linked to the selling price of cotton to the local spinning industry.
The state-owned Holding Company for Textile Weaving and Spinning is buying 85 percent of the year's premium variety crop for EGP 1,300 per qintar.
The government of President Abdel-Fattah El-Sisi, which aims to cut the budget deficit from 11.5 percent to 9 percent in the coming fiscal year, is offering lower prices this year, including EGP 1,250 for the longest staple Giza 86 and Giza 87 varieties. This comes even though the Egyptian pound has weakened by 14 percent against the dollar since the start of the year and has fallen further on the black market.
The ministry of agriculture has also failed to make new, higher yielding varieties available to cotton farmers in recent years, said Santarisy.
The total area planted with cotton in 2015 was 121,195 feddans, according to Cotton Arbitration and Testing General Organization (CATGO). This is expected to be halved this year, according to El-Bosaty, and the 2016/2017 harvest is projected to be the most meager in the history of Egyptian cotton.
Until the 1980s, Egypt cultivated as much as half a million hectares (1.2 million feddans) of cotton a year to meet global demand for luxury Egyptian cotton.
But technological advances and consumer preferences over the years has drastically reduced demand for the high-end product, with world consumption of long staple cotton currently accounting for just 2.5 percent of the total according to a United States Department of Agriculture report released last week.
The silver lining is that this may halt the decline in the quality of the cotton, says El-Bosaty.
"The smaller the area, the more you can control the quality," he says, stressing that newly salvaged pure long staple seeds were made available to growers this year.
* 1 qintar equals50 kg of cotton lint or 157 kg of cotton
http://english.ahram.org.eg/News/223060.aspx
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