While high cotton prices are finally giving farmers a break, they threaten disaster for textiles producers Luck is finally turning in favour of Egyptian cotton farmers. This year international cotton prices have more than doubled. Whereas they may have once wished for LE700 per qantar (a qantar = 50kg), this year they are getting LE1,800 per qantar. The surge is part of a global spike in prices triggered by a series of bad harvests and strong demand by China. And demand is booming. Alexandria Cotton Exporters Association figures show that around 83,000 tonnes (around 1.7 million qantars) of cotton worth around $300 million have been contracted. Reuters reported that this is in sharp contrast to contracts for 35,000 tonnes at $79 million last year. According to a source who preferred to remain anonymous, expectations are that export contracts will not fall below 100,000 tonnes this year (1 tonne = 1,000 kilogrammes = 20 qantars). According to CI Capital Egyptian cotton is exported to 24 countries; of which India held the highest share, with 24.7 per cent, followed by Switzerland and China. This year's high prices are expected to encourage farmers to take up the cultivation of the crop once dubbed as "white gold". Many of them had abandoned the cultivation of cotton due to the fact that prices were often not satisfactory enough and did not cover their costs. As a result, says Hussein Hegazy, head of the Agricultural Production and Irrigation Committee in the Shura Council, the areas planted with cotton are a third of what they were in 1990. "Farmers abandoned cotton for more lucrative crops like rice," he said. A report by Premiere Securities shows that the area planted with cotton dropped from around one million feddans (1 hectare = 2.5 feddan) in 1990 to 550,000 feddans in 2003. In 2010 the area cultivated with cotton is down to 375,000 feddans, according to Mohamed Abdel Meguid, head of the Cotton Council at the Ministry of Agriculture. Demand this year is not only from the international market but also from local spinning and weaving mills which have found their back against the wall; not only have the prices of cotton yarn gone through the roof but it is also difficult to get hold of at all. What they wish for is a ban on exports to make sure they have the raw material to keep their machines churning and they certainly do not wish to pay the international price. The position of local mills comes in sharp contrast to past years when the same mills would refuse to buy locally produced cotton, opting instead for the cheaper, lower quality, imported strains. But their demands are falling on deaf ears. It has been clearly stated by the government that no ban will be imposed on exports and if local mills wish to buy local cotton they must pay the international price. "There are commitments to be upheld," said Hegazy, explaining that "if we lose these markets we will have difficulty regaining them." Furthermore he considers the manufacturing of Egyptian cotton locally "a waste" because the local industry is not equipped to bring out the best of Egyptian cotton. Egyptian cotton is classified into four types. Giza 86 and Giza 88 are of the highest quality and are cultivated in the Delta region. The other two more types, Giza 80 and Giza 90, are planted in Upper Egypt and are of a lower quality, yet according to Mohamed Abdel-Meguid these still fall within the category of the long staple cottons. The problem with cotton cultivation, Abdel-Meguid maintains, is that it is not part of an industrial strategy. Hegazy adds that if Egyptian cotton were processed locally with the proper machinery to make use of its best qualities, that would mean more value added for Egypt, but until that happens exporting it as a raw material must continue. In the meantime, he believes that the short strains suitable for the production of coarse-count fabrics such as jeans, shirts, knitwear and towelling could be cultivated locally to fulfil the needs of mills and garments producers. An April 2010 US Department of Agriculture (USDA) report shows approximately 60 per cent of total local cotton consumption is imported cotton -- mainly from Greece and Sudan, Syria, Pakistan and India -- due to its lower prices as compared to locally produced cotton. Abdel-Meguid believes this year's cotton prices will lure farmers back to cultivating cotton. In fact, the USDA report shows that "cotton area and production in 2010/2011 are forecast to increase by 34 per cent." That, Abdel-Meguid says, will be beneficial because it will also mean the seeds will be used to produce cooking oil and the by-products of its processing are used as fodder. But he said that there should be some sort of guidance and surveillance of the market because if all farmers take up cotton then prices risk dropping again.
