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Government lifts ceiling on price of cotton
Aug '11
After keeping the per kg cotton price fixed for several months, the Ethiopian Government has lifted the ceiling that it had imposed on the price of the commodity. This has been done in view of significant fall in cotton prices in the world market.

The Ethiopian Textile Garment Manufacturers Association (ETGMA) and the Ethiopian Cotton Producers, Ginners, and Exporters Association (ECPGEA) have been informed about the Government's decision to lift the cap on cotton prices.

The Government banned cotton exports in November last year with a promise to cotton cultivators that they will be able to reap price for their produce that was in line with the international price.

The ban was imposed following a rise in demand for the raw material from the domestic textile units alongside a rise in world cotton prices, which spurred a dialogue between the ETGMA, ECPGEA and the Government to work out a solution.

Backed by various Government organizations such as the Ministry of Agriculture (MoA), Ethiopian Textile Industry Institute (ETIDI), Ministry of Industry (MoI) and Ministry of Trade (MoT), the price of cotton was fixed at 42.78 Br per kg for the next three months since November 2010. This price was arrived at after discounting the cost of transport from the then prevailing global prices.

However, the cotton growers were not pleased with such fixing of price, as while the global cotton prices were escalating every month, the cotton growers were being paid on the basis of price prevailing in November. While the world cotton prices rose to about 62 Br in March 2011, cotton growers in Ethiopia were still selling their produce at 42.78 Br per kg.

Hence, at the end of the three-month period, the Government again increased the cap to 57 Br per kg of cotton, as international price then stood at 73 Br. Now, the ceiling on price of cotton has been completely removed, reflecting a downward trend of cotton prices in the international market.

As indicated on Cotlook Index, which shows global cotton prices, the per kg price of cotton, which was at an all time high of US$ 4.9 in March 2011, further plummeted to below US$ 3.6 in June and is currently around US$ 2.5.

Fibre2fashion News Desk - India

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