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Cotton production may plunge 17%
07
May '09
U.S. Department of Agriculture's Foreign Agricultural Service published the cotton for Egypt. Total Cotton area and production in 2009/10 is forecasted to decline by 17 percent to 110,000 Hectares, due mainly to the declining profit margins for cotton. Exports are expected to decrease significantly to 100,000 bales, due to the world financial crisis coupled with competition from subsidized cotton producing countries. Imports are expected to increase to 420,000 bales.

Cotton area and production in 2009/2010 is forecasted to decline by 17 percent to 110,000 Hectares. Exports in 2009/08 are expected to decline sharply from the previous year. This is mainly due to the declining profit margins for cotton compared with other crops such as rice and corn. Exports for 2008/09 are expected to decline dramatically to 100,000 bales as a result of lost price competitiveness coupled with the world recession. Imports are forecasted to increase by about eight percent.

In an attempt to promote the usage of Egyptian cotton, the government allocated LE 325 million ($ 58 million) for the textile industry sector. On April 8, 2009 the Minister of Trade & Industry announced that the government would pay LE 2.72 ($0.50) per kg of yarn produced from Egyptian cotton. This step was taken in order to make yarn produced from Egyptian cotton more competitive with imported yarn. However, the impact of this announcement is not expected to be sufficient enough to affect farmer's decision to plant less cotton. Cotton area and production in 2009/2010 are is forecast to decrease by 17 percent from 2008/2009 levels.

This substantial decrease is mainly due to the declining profit margins for cotton, resulting from the increased costs of cotton production. This has influenced farmers to replace some cotton areas with other more lucrative crops such as corn and rice. In 2009/2010, approximately 20 percent of the total cotton crop is expected to be extra long staple (ELS) varieties (staple lengths of 1 3/8 inches and above), about 2 percent less than the previous season. The only ELS varieties are now Giza 88 and Giza 86. The remainder of the crop is comprised of long staple (LS) varieties (staple lengths of 1 1/4 inches): Giza 80 and Giza 90.

Until a few years ago, the textile industry's annual requirement for raw cotton averaged between 1.2 and 1.4 million bales. However, in 2009/2010, total use is projected at 900,000 bales. This decrease mainly results from the continued loss of competitiveness and financial difficulties faced by the local textile companies, plus the relatively high prices of local cotton compared to imported short staple cotton.

Approximately 60 percent of total cotton consumption, or 560,000 bales, is imported cotton, mainly from Greece and Sudan due to lower prices as compared to locally produced cotton. Imported cotton is used in the production of coarse count fabrics (Ne 20/1 to Ne 30/1), which are used for shirts,knitwear and towels. Textile and garment exporters also import fabric from cheaper sources such as Syria, Pakistan and India. This is done under the temporary admission system for imports, which allows manufacturers to import their inputs duty free provided that the end products are exported.


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