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Public Policy

Egyptian cotton: A new system to restore its global stature

asmaa fahmy
Last updated: 2022/11/02 at 10:30 PM
asmaa fahmy
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Egyptian cotton is recognized worldwide for its high quality. Its fame earned it a prominent place in terms of domestic production and consumption. In addition, Egyptian cotton is one of the main export crops that the state’s economic policy aims at maximizing its returns by increasing the quantity of exports. Results have showed that Egyptian cotton has leverage in world markets.

In recent years, Egyptian cotton has declined in the quantity produced and exported, and lands allocated for cultivation have decreased, which has affected the quantity and value of production. This has led the Egyptian government to adopt policies to revitalize Egyptian cotton cultivation, with a view to increasing Egyptian exports of fiber, fabrics and ready-made clothing. Some of the aspects related to the crop are manifested in the following:

I. Production and distribution:

– Production:

The cultivation of improved cotton seed varieties led to an increase in cotton productivity in 2018/2019 by 50 qintar per feddan (equivalent to 0.17 bales per hectare). The area harvested was raised to 141,000 hectares over the same period, up from 55,000 hectares in 2016/2017, resulting in increased supply over demand, thus reducing cotton prices. The following figure shows the development of cotton production:

Figure (1) Development of cotton production in 2010/2021

Quantity: Thousand bales

Source: USDA Foreign Agricultural Service 

The previous figure shows the fluctuation of the cotton crop, but the overall trend is downward during 2010/2021, with the crop falling from 745,000 bales in 2011/2012 to 305,000 bales in 2019/2020. The Foreign Agricultural Service in Egypt, affiliated to the US Department of Agriculture, expects that cotton production will continue to decline to 215,000 bales in 2020/2021.

According to a report issued in January 2019 by the Ministry of Agriculture and Land Reclamation, Kafr Al-Sheikh governorate topped the list of cotton plantations in Egypt. The following figure shows lands cultivated with cotton in Egypt.

Figure (2): Average area under cotton cultivation in Egypt between 2015 and 2017 (1,000 feddan)

Source: Ministry of Agriculture and Land Reclamation

– Distribution (exports and consumption):

According to a November 2020 bulletin issued by the Central Agency of Public Mobilization and Statistics, the total exports and consumption of Egyptian cotton declined between September and November 2019 to reach 1,436,000 metric qintar, compared to 2,119,000 metric qintar in the same period the year before. Some 79.6 percent of the cotton distributed was exported, with exports falling to EGP 2.313 billion during the period September-November 2019, down from EGP 3.994 billion in the same period in 2018.

India came on top of the list of countries importing the Egyptian cotton, followed by Pakistan, Bangladesh, Greece, Germany and Italy. The following figure shows the main export destinations of Egyptian cotton:

Figure (3): Main export destinations from September 2019 to March 2020

Scale: Bales

Source: USDA Foreign Agriculture Service 

The above figure shows that India is the main importer of Egyptian cotton, with 118,000 bales exported during 2019/2020, followed by 66,787 bales imported by Pakistan. The ranking of the importing countries of India and Pakistan is expected to remain the same during 2020/2021.

II. Price development:

Cotton prices reached EGP 2,050 per qintar in March 2019, prompting farmers to cut production to raise cotton prices. In 2019/2020, cultivated lands and yields decreased, yet prices remained low, with prices averaging EGP 2,100-2,300 for extra-long staple cotton, and EGP 1900-2100 for long and medium staple cotton. Cotton prices and the rate of change can be tracked through the following table:

Table (1): Cotton prices and rate of change during 2018/2019 and 2019/2020


Variety
Price 2018/2019
EGP/Bales
Price 2019/2020
EGP/Bales
Rate of change
Extra-long staple cotton10,9129,579-12%
Long staple cotton10,6708,708-18%

As shown, the price of the extra-long staple cotton bale fell from EGP 10,912 in 2018/2019 to EGP 9,579 in 2019/2020, a drop in price of 12 percent. The long staple cotton also fell from EGP 10,670 per bale in 2018/2019 to EGP 8,708 per bale in 2019/2020, a drop in price of 18 percent.

III. New system and state efforts:

Until recently, the cotton marketing system was subject to indicative price system, where these indicative prices were based on cotton weight, while crop quality was not taken into account. This caused losses to traders and other buyers who bought cotton at indicative prices after the quality of cotton was found to be low, so the Egyptian government worked on solving the problems facing cotton farmers, providing cotton seeds, fertilizer and pesticides, monitoring the sales outlets and distribution of cotton seeds, and ensuring that they are approved by the Ministry of Agriculture.

In light of the presidential directives for the Egyptian cotton to regain its previous allure and to revitalize the textile sector, a number of measures were adopted, including planning a EGP 21 billion investment scheme. The plan includes several aspects, such as: increasing specialization, productivity and export, mechanization of work processes, developing textile and gins, and providing modern machinery, equipment and consultants.

The new cotton trading system is also based on providing centers through which cotton is received directly from farmers to be auctioned for the purpose of protecting the rights of farmers, pricing cotton fairly, and regulating its circulation. Cotton will be traded on the goods exchange that will be established this year. The new cotton system has been applied in four governorates: Fayoum, Beni Sweif, Sharqiya and Beheira.

Finally, the cotton sector in Egypt has a competitive advantage, not only in major consumer markets, but also in regional markets with high growth potential and in the relatively large domestic market. The sector is characterized by low production costs, especially wages, the availability of labor amounting to approximately 600,000 workers, and an advanced infrastructure. It only lacks dealing with few challenges that officials are already working to overcome through the recent policies that will help in restoring the global standing of Egyptian cotton.

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TAGGED: distribution, Egyptian cotton, Featured, Production
asmaa fahmy March 20, 2021
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