Thursday, May 31, 2012

White gold: Are Egypt's cotton industries beyond salvation?

Egypt Independent

White gold: Are Egypt's cotton industries beyond salvation?

Wed, 16/05/2012
Jano Charbel

Egypt’s extra-long staple cotton, acclaimed to be the world’s finest, has been in a state of rapid decline for the past 20 years. The production of Egyptian cotton is threatened with demise, along with the country’s textile industry, which had absorbed domestic cotton production.

Often referred to as “white gold,” cotton is no longer the country’s chief cash crop, and the textile industry is no longer a leading economic powerhouse.

Since the mid-1800s, “cotton was Egypt’s primary cash crop until 2001, but not anymore,” said Mohamed Fathy, professor of agriculture at Monufiya University.

“The Egyptian state used to subsidize all the cotton farmers’ needs, from A to Z. This included subsidized seeds, fertilizers, pesticides, irrigation and subsidized prices for the purchase of their cotton harvests,” he said.

Official and independent statistics, as of 2010–11, indicate that the area of agricultural lands producing cotton in Egypt has decreased to a quarter (or less) of its size in the 1990s. An estimated 2 million feddans were being used for cotton cultivation until around 2001.

According to Fathy, in 2011, cotton-growing lands amounted to 310,000 feddans, or just over 3 percent of the nearly 9 million feddans of agricultural land. In the 1960s, more than 4 million, or nearly 67 percent, of 6 million total cultivated feddans were devoted to cotton, according to Fathy.

According to Khaled Badawy, director of the Egyptian Center for Rural Studies, “the state’s adoption of [International Monetary Fund] open-market policies in the early 1990s, the subsequent cancellation of protectionist economic policies, the move away from centralized periodic plans for agricultural production, and the lifting of subsidies have all hit Egypt’s cotton farmers hard.”

Badawy added that the Agriculture Ministry has refrained from buying cotton from local farmers because their product is well above the average global market price. The agricultural specialist added that the fragmentation of land ownership into tiny plots as well as insufficient and inadequate irrigation networks have also contributed to the woes of cotton farmers.

Thousands of farmers, unable to cover the expenses of cultivation, have turned away from cotton in favor of more profitable cash crops, particularly fruits, for both domestic markets and for export.

“Given that the government is no longer buying its cotton at market prices, most Nile Delta farmers have been stockpiling their cotton harvests since last year,” said Badawy.

Mohamed al-Sunni, a cotton farmer from Quesna, in the Nile Delta governorate of Monufiya, said “thousands of farmers are stockpiling their cotton because there’s nobody willing to buy it.”

The elderly farmer explained that thousands of cotton farmers are storing their produce, not only in Monufiya, but in a number of other governorates.

“Just a few years ago, the Agriculture Ministry used to purchase cotton from farmers at market prices,” he said. The ministry’s local agricultural cooperatives, cotton ginning companies and textile factories also paid market prices.

“Prices have plummeted. So nowadays there are very few people interested in buying our cotton,” he said. “It’s not like we are withholding our cotton harvest from the government, but the prices we’re being offered don’t even cover the cost of production.”

Sunni said that just last year he sold one qintar (or quintal, about 45 kilograms) of cotton for LE1,850. This year the qintar is worth LE900 to 1,000.

For well over a decade, a flood of cheaper cotton imports from China, India, the US and Sudan have flooded the market — most of these cotton varieties are short- or mid-length staples. The economic policies adopted by the Mubarak regime, most of which still remain in effect, have left Egypt’s cotton and textile industries prey to cheap Asian imports at the same time that cotton faces fierce competition from heavily subsidized, large American growers.

Egyptian cotton is valued for its extra-long fibers, which are characterized as being more absorbent, strong and durable. Egyptian cotton can also be spun into lengthy and fine threads, allowing for a greater thread count per centimeter, which produces a finer and softer fabric. However, increased global production of cheaper short and mid-length cottons has driven down prices worldwide. Long and extra-long staples are more expensive, and account for only around 2 percent of global cotton production.

Egypt’s textile industries have been drawn into cotton’s downward spiral.

“Since many of the existing textile machines are old, and are only designed to process long-staple cottons, these machines cannot manufacture textiles using the shorter cotton fibers, which are the most prevalent,” Badawy said. Moreover, the privatizations of textile companies since the 1990s, along with corruption, bankruptcy and the closure and liquidation of factories, have “compounded the cotton crisis since the domestic textile industries are absorbing less cotton from Egyptian farmers.”

Badawy argued that “ideally Egypt should undo the steps that led to this crisis, but it’s too late to close markets to foreign imports or impose protectionist economic policies, because the Egyptian state is bound to the international trade agreements that it signed and ratified.”

As for subsidies, “it would be very difficult to subsidize Egypt’s small farmers. Farmers typically own very small plots of land, which would be impractical to subsidize, while millions of others are landless peasants,” said Badawy, contrasting the situation here with that of in the US or European Union. “These states spend hundreds of billions of dollars each year subsidizing their farmers. Yet farmers there own large tracts of land, which are typically mechanized.

“Subsidizing Egypt’s farmers may be a temporary solution to save the cotton industries — for 10 or 20 years.  However, this would impose a heavy burden on the national economy, and is not sustainable in the long term — especially in light of declining cotton prices on the world market.”

According to Badawy, the ministries of Agriculture, Trade and Industry, and Manpower have neglected their responsibilities toward the cotton industry, its farmers and workers. The Mubarak regime ignored the demands of tens of millions of small farmers, while “the 25 January revolution has sidelined them. Their problems remain unaddressed by political parties and presidential candidates. Prospects for Egypt's cotton growing industries are not at all rosy. ”

Badawy criticized presidential candidates for promising to bolster the agriculture industry with new infrastructure and irrigation systems and improve farm conditions without laying out how they plan to pay for such programs.

“Tens of billions of pounds are required just to begin addressing these basic problems,” he said.
Badawy rests his hopes on recently founded farmer unions, rather than politicians. Egypt's first farmers unions, while still in their embryonic stages, are now found in nearly every governorate.

“The former regime chose to move away from cotton production. This was a politicized decision dictated by the IMF and approved by the Mubarak regime,” said Independent Farmers’ Federation President Abdel Meguid al-Khouly. “The cotton crisis is a very clear reality, not only in Beheira and Monufiya governorates, but in all other cotton-growing governorates, and agricultural lands.”

Khouly said that “since last year, cotton farmers have protested, marched and blocked roads across the country in protest against their neglected demands.  While farmers’ representatives have repeatedly met with Prime Minister Kamal al-Ganzouri, and Essam Sharaf before him, to no avail.”

The federation leader claimed that “Egypt is moving away from self-sufficiency in all crops, because there is no centralized agricultural planning. Such planning ended in the early 1990s.” He predicted more agricultural and economic troubles if the country continues to follow the trajectory laid out by former rulers.

“Egypt has become a massive import market, we are no longer a production-based economy. We should only import that which we cannot produce domestically.” Khouly said, also advocating that the government decrease the tax burden on small farmers and resume subsidies.

Khouly also has little respect for politicians.

“It is almost impossible to identify the allegiances of these [presidential] candidates. What we do know, however, is that they are only looking after personal interests, but not the interests of farmers. This is simply because none of them are farmers.”
*Photo by Alsayed Albaz


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