A farmer picks cotton on a farm in Qaha about 25 km (16 miles) north of Cairo, Egypt. (Photo: Reuters)
Egypt's cotton exports have been hit by a local hike in prices this year, following a decline in local production brought about by reduced acreage and the lifting of an import ban.
Exports diminished to 17,028 tonnes since the beginning of the marketing season of the cash crop in September 2013, a drop of 45.3 percent compared with the 31,137 tonnes exported in the same period of the previous season.
Cotton exports for September 2013 to January 2014 were worth some $62.1 million according to Mefreh El-Beltagy, head of Egypt's Alexandria Cotton Exporters' Association (Alcotexa), compared to around $100 million during the same period of the previous year.
Total exports in the 2012/13 season, which runs from September to August, were worth $215 million, accounting for 22.3 percent of local production, which stood at 300,000 tonnes.
They comprised cotton varieties Giza 86, which accounts for 90 percent of current local production, Giza 92, and Giza 88, with average export price of 194 cent/lb.
But a reduction in acreage has caused a production drop this year, as the harvest yielded only 200,000 tonnes of cotton for this marketing year, driving prices up.
The lifting of an import ban last spring which had been in force since Egypt's 2011 revolution has also contributed to the inflation, explained Ahmed El-Bosaty, vice-president of Alcotexa.
"Before the ban 70 percent of Egypt's spinning capacity, held by its public-sector spinning companies, was dependent on cheaper, imported cotton," says El-Bosaty. "The ban forced them to purchase local produce, but this year this is no longer the case, and prices are higher because last year's local stocks have been largely exhausted as a result of the ban."
As local public sector companies refrain from purchasing local cotton, importers abroad are making smaller incremental orders in hopes that prices will drop throughout the season.
"Usually the export market will witness bulk-buying from September to January, which has not been the case this year as [some have] resorted to hand-to mouth pattern buying," explained El-Bosaty.
Egypt's top cotton importing countries this season are India, Switzerland and Germany, with imports of 5,400 tonnes, 2,078 tonnes, and 1,780 tonnes respectively.
Egyptian cotton traders and exporters are buying cotton from farmers at LE1,670 per qintar (quintal) on average, to offer it to the spinning companies at LE1,270 per qintar, which is considered too costly by local companies.
"The total amount of cotton delivered to local spinning mills has declined, reaching only 1,500 tonnes of lint cotton (after ginning) since September 2013 until now," says El-Beltagy.
Spinning companies are only willing to buy the cotton at a price of LE1,070 per qintar -LE200 less than what traders are asking for -- to be able to sell their products at competitive prices locally and internationally, explains El-Beltagy.
But in December 2013, Egypt's Supreme Organizing Committee of Cotton Trade asked the government for a subsidy of LE200 million for spinning companies to purchase one million qintar of Egyptian lint cotton at LE1,270 per qintar, which the cabinet has yet to formally approve.