Cotton prices in Egypt have jumped to record levels amid increased demand and a decrease in global production.
The price of a qantar of cotton (about 157kg of seed cotton or 45kg of lint cotton) has increased by more than 70 per cent compared to last year’s prices and reached about LE3,900. It was sold last year for between LE1,800 and LE1,900.
Cotton farmers who had previously abandoned the crop after incurring heavy losses since a government decision in the mid-1990s to lift support for a crop traditionally called “Egypt’s white gold” with its quality being recognised worldwide are now willing to cultivate more of it.
Mohamed Abdel-Sattar, head of the General Syndicate of Agricultural Workers, attributed the rise in cotton prices to the introduction of a cotton-marketing system by auction across the country, where periodic auctions are held between trading companies in order to achieve the highest returns for farmers.
The latter receive 70 per cent of their dues from the company that wins the auction within 24 hours and the remaining 30 per cent within a week.
The government has also taken a new approach to selling cotton this year, with a ministerial committee setting the prices for opening auctions with an increased margin of 40 per cent above global prices for cotton produced in the Lower Egyptian governorates and 20 per cent for that produced in Upper Egypt.
Cotton cultivation deteriorated in Egypt after the issuance of Law 210/1994 and the liberalisation of the cotton trade, together with the abolition of the cooperative marketing system that had ensured strong support for farmers.
Prior to 1994, the government bought cotton from farmers and took charge of marketing it, whether by selling it to Egyptian spinning and weaving companies or exporting it. From 1994 to 2018-19, this was replaced by a system in which private companies bought cotton directly from farmers.
There was an increase in the mixing of cotton varieties, which lead to impurities and made it less desirable to some traders.
The area cultivated with cotton in Egypt in 2021 amounts to some 236,000 feddans, compared to 183,000 feddans in 2020. Some observers believe that the government’s restrictions on cultivating rice, intended to lower water consumption, have encouraged farmers to cultivate more cotton.
The cultivation season for 2021 began in March and ended in June. Sales of cotton start in September. Rising demand and a hike in prices have encouraged farmers to continue growing cotton even after the end of the season.
Egyptian cotton is known worldwide for its quality. It is used as a raw material in the spinning and weaving and clothing industry, in addition to being exported to various countries.
Abdel-Sattar said that seasonal floods in the US and India this year might have affected the prices of imported cotton and created increased demand for Egyptian cotton as a result of a shortage in global supply. International prices for cotton rose by almost 60 per cent this year.
However, he warned that the rise in cotton prices would lead to an increase in the prices of threads and cloth, leading to an increase in the prices of ready-made garments.
“Clothing prices might increase by as much as 100 per cent if the price of cotton continues to rise,” he said.
“Many factories do not rely on long-staple Egyptian cotton due to its high price, but use short-staple and imported cotton as well,” said Mahmoud Al-Daour, head of the Clothing Division at the Federation of Chambers of Commerce.
The prices of winter clothes, he added, could witness a 50 per cent increase next season, in the light of the increase in prices of raw materials compared to last year.
Egypt exports the majority of its locally cultivated long-staple cotton and imports three million qantars of short-staple cotton primarily used in local textile production. The country is planning to plant more short-staple cotton to decrease imports.
*A version of this article appears in print in the 16 September, 2021 edition of Al-Ahram Weekly