Egypt’s 2016 Cotton production set to plummet
Egypt 2016/17 cotton production is estimated at a historic low. Post is revising cot- ton production downwards from 395,000 bales to a record low of 150000 bales, a drop of 53 % or 170000 bales from last year’s production of 320000 bales. The drop in production is due to a jaw-dropping decline in area planted of 50 % to just 50000 ha compared to 100000 ha last year
Post attributes the drop in area planted to cotton farmers’ concern in terms of their ability to market the crop, especially with the lack of strong commitment from the government that it will buy the crop from farmers. Egypt’s industry is relying less on the domestic crop which is comprised mostly of extra- long staple and long staple varieties, while users’ needs have shifted to medium and short staple varieties.
On May 23, 2016, the Ministry of Agriculture and Land Reclamation (MALR) released their survey sta- ting that 51000 ha have been planted to cotton this year compared to 97000 ha last year, a drop of 47 %. MALR’s report indicated that 40,000 ha were planted with extra- long and long staple varieties in the Delta Region compared to 85,000 ha last year, a drop of 53 percent, while 11,000 ha were planted with medium staple varieties in the Upper Egypt Region, the same as in 2015.
This historic drop in cotton area came unexpectedly as both the government and the cotton industry’s consensus on the worst case scenario was that area would remain unchanged from MY2015/16.
In the 1980s, Egypt grew as much as 500000 ha of cotton per year, but this area decreased to 400000 ha per year in the 1990s. By MY2000/01, Egypt’s cotton area was down to 223000 ha, continuing to drop and reaching 100000 ha by MY2015/16. The drop is attributed mainly to the changes taking place in the world textile industry responding to consumer preferences and newer technologies.
Consumer preference shifted heavily to garments such as denim, t-shirts, jeans, and others that require short and medium staple cotton, outpacing the demand for higher-end clothing and bed sheets that use extra-long and long staple cotton varieties. Additionally, with the introduction of new technologies, manufacturers were able to efficiently produce the types of yarns from short and medium staple cotton, which previously could only be produced from extra-long and long staple cottons. World consumption of extra-long and long staple varieties decreased, currently accounting for only 2.5 % of total global consumption.
Unfortunately, the Egyptian Government and the country’s growers failed to adapt to the changing scenario. To this day, Egypt’s cot- ton production is made up of about 90 percent extra-long and long staple varieties, while 10 % are short and medium staple varieties. As demand for extra-long and long staple cotton diminished and prices were less attractive, production declined as less efficient farmers were unable to market their crop successfully. To mitigate this problem, the government instituted policies focusing on subsidising extra-long and long staple cotton through a series of mechanisms. The policies worked for a while, containing further decreases in production; however, in the last couple of years as the government tried to reduce its subsidies, it has become evident that the policies only exacerbated the problem as farmers have been unable to market their output.
Despite announcing prices for the local cotton production on May 10, 2016, the announcement came in late and the Egyptian Government did not make it clear whether it would buy the cotton production from farmers through the Holding Company for Textile, Weaving and Spinning (HCTWS), as it did for the 2015 crop. Therefore the government’s late announcement (usually announced before the onset of planting) and the lack of a firm commitment to buy the crop made farmers wary that they would end up with a crop they would be unable to sell, resulting in a larger-than-expected drop in cultivated area. Of late, the government has come in for withering criticism from the Parliament, with the Committee of Agriculture and Irrigation summoning the Minister of Agriculture and Land Reclamation, Dr. Essam Fayed, twice to discuss the current situation.
Purchase prices announced are EGP 1250 (USD 140.7) per qintar (or USD 682/bale), a small drop from the EGP 1300 ($146.3) per qintar (or USD 709/bale) offered last year, for extra-long and long staple varieties and EGP 1100 (USD 123.8) per qintar (or USD 600/bale), a similar drop from the EGP 1150 (USD 129) per qintar (or USD 625/bale) offered last year for the short and medium staple varieties grown in Upper Egypt. The massive fall in local cotton production will dramatically affect Egypt’s cotton exports and imports.