Magazine article The Middle East

Egypt: King Cotton Revives

Magazine article The Middle East

Egypt: King Cotton Revives

Article excerpt

The cotton sector is emerging from a depression in Egypt. Once a dominant cash crop in the country, it saw its share of the world market fall drastically in the 1980s.

THERE WAS A TIME in the none too distant past when the world looked to Egypt as the largest producer of the finest varieties of cotton. More recently, however, a combination of rigid federal policies and mismanagement, competition from other countries and the collapse of its largest cotton importer, the Soviet Union and its satellites, almost spelled doom for the cash crop. But because of a little luck and current efforts to slough off government involvement in cotton production and trading, Egypt could pull itself back to be a world competitor again.

For much of this century, cotton was king in Egypt. The Nile Delta, with its famous Giza extra-long and long-staple. varieties, supplied more than 25% of the world's cotton needs. As the dominant exporter, Egypt was the crop's price-setter. That was the position that the country maintained until the late 1970s. Then Egypt's reign began to crumble.

Since Mohammed Ali, the father of modern Egypt, introduced cotton in the 1840s, it has been known as a government crop. Rulers forced farmers to grow cotton on public property and paid the growers whatever the government wanted. With the introduction of a centralised economy under President Gamal Abdel Nasser in the 1950s, farmers were given the property, but told what percentage of the land would be devoted to cotton. The government collected the harvest, ginned it in public mills, determined the prices, paid the farmers and arranged the exporting contracts.

Demand for Egyptian cotton began to erode in the early 1980s, largely because of the conviction that its traditional exporting position was endless and its unwillingness to adapt to a changing world.

New technology allowed companies in other countries to produce a high-quality yarn with shorter staple cotton. The United States forcefully emerged on the world scene with its fine quality Pima cotton at attractive prices. Meanwhile, Egypt decreased its research on new varieties that could increase its yield.

At the same time, the country relaxed its measures to police its compulsory delivery system. Farmers neglected their cotton fields and turned to other more lucrative crops. In 1989, Egypt lost a huge client with the collapse of the Soviet Union and Eastern Europe, which together annually imported about 60% of Egypt's crop.

As exports and earnings fell, Egypt began raising its cotton prices to make up for the financial losses. Starting in 1987/1988, the government raised prices 30% each year for three years. As a result, Egypt completely priced itself out of the cotton market.

Demand fell even further. To contain the haemorrhage, the government reversed course in 1991 and started reducing prices by 15% to 20%. But the damage to Egypt's reputation had been shattered and its market, some believe, irrevocably lost. Exports, which in 1981/1982 were 3.8m kantars, had collapsed to the level of 339,000 kantars in 1992/1993. (A kantar is equal to 50 kilogrammes). Egypt's world market share in 1981 of 30% was reduced to about 3% today.

With few buyers, Egypt's cotton reserves rose. They accumulated in warehouses for more than two years. Then, during the last growing season, Egypt found a stroke of luck in competing countries' misfortune. Just as Egypt was sitting on a surplus, pests sabotaged Pakistan's yield and unfavourable weather conditions damaged crops in India and China. A 16% worldwide drop in extra-long and large-staple cotton production created a supply shock.

Traditional buyers from eastern countries turned to Egypt to meet their demands. In fact, India, which had not bought Egyptian cotton in 25 years, suddenly became Egypt's largest single-year importer with 83,000 bales. (A bale equals 6.3 kantars or 315 kilogrammes.) Switzerland increased its purchases from 7,000 bales in 1993 to 64,000 in 1994. …

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