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Egypt to Cease Cotton Subsidies for Farmers

The Egyptian government recently announced that it would no longer provide financial support for cotton farmers beginning next agricultural season due to high costs to grow the commodity and low demand for it.

According to the Middle East Monitor, the country’s minister of agriculture Adel El-Beltagy said growing cotton, particularly the long staple variety, is very expensive and demand is limited both domestically and internationally. The Central Agency for Public Mobilization and Statistics reported that domestic cotton consumption fell by 68.4% between March and May 2014.

The news comes just one week after Egyptian Prime Minister, Ibrahim Mehleb announced that the government has made decisions toward developing the country’s textile sector as a whole, and had plans to decide on a policy for cotton cultivation.

Egypt is known for producing a high proportion of barbadense, or pima cotton. Pima cotton demands a longer growing season but can result in a longer, stronger, finer fiber often used for high quality, high yarn count fabrics.

Some factories and spinners in the country have now started to import short staple cotton at lower prices instead of buying local cotton.

Cotton Incorporated senior economist Jon Devine said, “The announced reduction in support to Egyptian cotton producers could be expected to aggravate what has been a downtrend in Egyptian production. In recent years (2012/13-2014/15), Egypt has been producing less than half the total volume of cotton that it was growing in the early 2000s.”

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With the declines in Egypt, the U.S. emerged as the world’s largest producer of barbadense/ELS/pima cotton, Devine said.

“In the U.S., virtually of the barbadense/ELS/pima cotton is produced in California. California is experiencing their most severe drought on record, and the difficult conditions drove a sharp reduction in barbadense/ELS/pima plantings for this crop year’s harvest,” Devine explained.

He added, “The tightness in U.S. supply was a reason that barbadense/ELS/pima prices were high early in the crop year (near 200 cents/lb). In recent months, there have been reports of weakness in demand for barbadense/ELS/pima due to the high price levels. As a result, barbadense/ELS/pima have been declining. The most recent U.S. pima export prices (analogous to the A Index, meaning they include delivery to Asia) have been near 185 cents/lb.”

Egypt is projected to produce one half million bales for the 2014/15 season, an almost 21 percent increase over last year, according to the U.S. Department of Agriculture, something of a rebound according to Devine, who added that the reason for it may be the high prices for barbadense/pima/ELS/Egyptian cotton last spring.

“While there was an uptick in planting/production, the overall volume is still far below the average from 10 or more years ago,” Devine said.

Beltagy, said his ministry is working with relevant stakeholders to make a comprehensive reevaluation of Egyptian cotton’s position in order to regain its credibility in the market.