Mar 17 2012
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Waiting on cotton candy
The start of 2012 brought disappointing news to Egyptian cotton exporters, as demand on cotton significantly slumped. In his statement before parliament last month, Minister of Agriculture Mohamed Reda Ismail stated that no country had yet shown an interest in purchasing Egyptian cotton this year.
Ismail added that 365,000 feddans were cultivated to produce a harvest of three million qantar (150 million kg) of cotton last year. The harvest was sold to 38 countries, at a price of LE2,000 per qantar.
"We do not know what is being plotted against us or the real reason for countries to refrain from buying Egyptian cotton," Ismail said.
El-Fateh explained that the start of the export season 2011/12, which started in October and ends in August, showed that demand had declined. Not all countries who bought Egyptian cotton last year wanted to buy this year. "Some countries already have enough with the quantities of Egyptian cotton they bought last year," El-Fateh told Al-Ahram Weekly.
Alcotan Cotton Trading and Export Company CEO Magdi El-Meniawi agreed with El-Fateh. "I believe the minister meant to say that demand this year is much lower than last year," he told the Weekly. "This time last year, we had exported double the quantity we have exported so far this year."
El-Meniawi attributed part of the slowdown in demand to a drop in global demand. Europe and the United States are the biggest garments consumers. "Since January, demand from Europe and the US has been weak, pushing global demand downwards," he said.
El-Meniawi added that weak demand was a result of Europe's economic difficulties, as well as the austerity measures pursued by many countries.
Another reason for the decline in demand, said El-Meniawi, were unstable political conditions in Egypt. He said that continuous strikes and demonstrations sent bad signals to importers. "Importers have become worried over the country's commitment to export contracts," he said.
Moreover, the drop in demand and the consequent oversupply of cotton has forced prices down. El-Meniawi stated that Giza 88, a high- quality Egyptian cotton, was exported at LE950 this year, compared to LE1,800 last year.
Nevertheless, both El-Fateh and El-Meniawi were optimistic for this year's harvest, and expected a surge in demand by next April. El-Meniawi said stagnant demand would urge farmers to abandon cotton for more lucrative crops. This would result in reducing cotton cultivated lands. "This would raise importers' concerns over a lack in cotton supply," he added. "And thus their demand would increase."
El-Fateh said farmers have no accumulated cotton in store. He said farmers in some governorates had faced problems, but that these were resolved after the government pledged to buy Giza 86 and Giza 88 from farmers at LE1,150 per qantar.
Earlier in January, the government decided to allocate LE200 million in subsidies to cotton farmers. These subsidies were distributed to local spinning and weaving mills, in order to be able to buy cotton from farmers at a price of LE2,000 per qantar.
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 types, Giza 80 and Giza 90, are planted in Upper Egypt and are of lower quality.
© Al Ahram Weekly 2012
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