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Al-Ahram Weekly 30 Sep. - 6 Oct. 1999 Issue No. 449 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 30 Sep. - 6 Oct. 1999 Issue No. 449
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Focus Features Profile Travel Living Sports People Time Out Chronicles Cartoons Letters Cut prices for competitive cotton
By Gamal Essam El-DinAnxious to regain Egypt's former position as the top exporter in the world cotton market, the Federation of Egyptian Cotton Exporters (FECE) decided last week to make a major concession by reducing export prices of Egyptian long-staple cotton varieties. The export price of extra-long staple cotton known as Giza 70 will be cut from 114 cents per libra to 100 cents per libra ($110 per qantar), while that of the long-staple variety, Giza 86, will be reduced from 97 cents per libra to 92 cents per libra ($102 per qantar), said Said Haggag, FECE's chairman. (One qantar equals 50kg.)
"The strategy behind this reduction is not only to adjust to the fall in cotton export prices on world markets but also to confront the fierce competition posed by Pima, the US-developed cotton variety," Haggag said. The US Pima cotton exports, which are sold internationally at about 91 cents per libra, are expected to reach 3.5 million qantars in the 1999/2000 season.
The US has been able in recent years to boost its production of extra long-staple varieties by 43 per cent by increasing the cultivated area and raising productivity rates, according to a recent report compiled by the Alexandria Chamber of Commerce. This has allowed the US to currently provide 25 per cent of world production of extra long-staple varieties, the report added. In terms of extra long-staple exports, the report said, in the new season the US will raise its export volume by 46 per cent (95,000 tonnes), while Egypt's will decrease by 25 per cent (80,000 tonnes).
Although Egypt's share of world cotton exports experienced a downward trend in the last few years, there have been concentrated efforts to regain part of the lost trade. According to figures recently released by the Ministry of Trade (MOT), Egypt's cotton exports increased from almost zero in 1994 to 380,000 qantars in 1995/1996; 929,000 qantars in 1996/1997; 1.5 million qantars in 1997/1998; and 2.2 million qantars, valued at LE825 million, in 1998/1999. For the coming season (1999-2000), officials are optimistic that many new export contracts for Egyptian cotton will be concluded. For example, in just one month contracts for cotton to be delivered to 13 countries covered a quantity of 49,500 qantars. And total Egyptian cotton exports during the 1999/2000 period are expected to exceed 2.5 million qantars.
While the new export prices were warmly welcomed by cotton exporters, there are fears among cotton growers that these prices mean they will receive lower prices for these cotton deliveries. It is true that the cabinet decided two weeks ago that growers will receive export prices for their deliveries, according to Haggag. "We decided to reduce export prices to face competition and to dispose of ballooning cotton stocks estimated at 1.5 million qantars. For its part, the government promised to compensate cotton growers for any drop in export prices. All in all, the government will be bound to pay LE120 million to make up for any difference between the export price and the price paid to farmers," Haggag said. Talaat Hamad, minister of state for cabinet affairs, indicated that a LE200 million fund will be established to compensate the country's politically influential cotton growers and cushion them against any losses.
In addition, the fact that cotton deliveries will be sold at higher than export prices to local manufacturers could negatively affect the needs of Egyptian textile mills. Abdel-Hakim Haggag, chairman of the Holding Company for Spinning, Weaving and Ready-made Garments, told Al-Ahram Weekly that selling the cotton at this higher price to the local mills will cause them to suffer burdensome costs. "The fact that the government still insists on intervening in the [domestic] cotton market and imposing a guaranteed price means that local mills will be bound to incur sharp increases in their production costs. We are not against paying Egyptian farmers a high price for their cotton deliveries, but we also emphasise that this should not come at the expense of the cash liquidity of textile mills," Haggag said. In the 1996/1997 season, the mills had to pay LE230 million for the 3.7 million qantars they needed, he added.
The MOT's report said that although the area cultivated with cotton decreased from 720,000 feddans in the 1997/1998 season to 650,000 in 1998/1999, the yield has remained the same at 4.5 million qantars. Added to a strategic stock of cotton estimated at 1.5 million, "This makes the cotton available for the new season an estimated six million qantars," the report said. This quantity, however, will barely meet export and local manufacturers' needs.
"Even if this amount will supply the mills' need for almost four million qantars in one season, they will still be obliged to resort to importing," Haggag said. Although the new season's production is relatively reasonable, there is a deficit in the yield of short-staple varieties needed by local mills, he said. "These varieties come from Upper Egypt, and the area had a deficit of one million qantars. We resorted to importing not only because of this but also to give a greater opportunity to cotton exporters," Haggag said. He revealed that a shipment of 220,000 qantars of short-staple cotton was imported from Greece at a price of LE240 per qantar. "In Egypt, this variety is sold at LE267 per qantar."
At the same time, reports about the new cotton harvest are contradictory. According to many agricultural experts, the 1998/1999 yield is one of the lowest in Egypt's long history of cotton production. In the middle of the season, reports were rife that the crop was hit by a heavy infestation of boll worms and efficient pest-control measures were lacking. However, Saad Nassar, chairman of the Agricultural Research Centre, told the Weekly that the Ministry of Agriculture (MOA) was able to introduce highly effective pest control methods that saved the crop from disaster.
"Minister of Agriculture Youssef Wali gave tough instructions to agricultural extension agents to inform farmers about the ideal methods of collecting the boll worms, proper fertilisation techniques, [the importance of] regular irrigation of the crop and the need to limit use of environmentally harmful chemicals. This is why the harvest of cotton began very early -- in the last ten days of August -- and productivity rates were very high, ranging from six to 7.5 qantars per feddan," Nassar said.
In addition, the cabinet is determined to make a success of the cotton harvest, so it ordered commercial banks to provide LE2.6 billion in loans to companies and cooperative societies to cover the purchase of five million qantars of cotton, Nassar added. "Because farmers can now get a higher return, they will have more cash for their cotton planting and the quality of seeds and fertiliser is bound to improve in the coming seasons," Nassar said.
