Ahmed Osman, a cotton farmer, saw his hopes dashed after the cotton auction in his home governorate of Beheira set the price for Giza 94 cotton at 10,160 EGP per quintal, a decrease of over 6,000 EGP from the price he had hoped for (the previous price was 16,000 EGP according to cotton auctions from September 2023 to January 2024).
Osman tells Zawia3 that the cotton season started strong, with initial auction prices reaching 18,000 EGP per quintal, which made him optimistic and hopeful for his six-acre farm in Mahmoudiyah to yield profits that would offset the high costs of farming supplies. However, the auction results were disappointing, compounded by seed defects that reduced yield to less than 10 quintals per acre.
“This season was the worst,” he adds. “From seeds that didn’t fully germinate, lowering yield, to pricing that shattered our hopes, especially with farming costs tripling from last year due to rising prices and the dollar crisis. We bought pesticides and seeds priced at the black market dollar rate of 70 EGP, but when selling, the crop was priced at the current dollar rate of 46 EGP.”
Osman participated in the last regular auction in March but withdrew after the quintal was priced at 10,160 EGP, far below expectations. After hearing about an exceptional auction, he hoped for a price closer to 15,000 EGP per quintal but was shocked by a lower price of 60 EGP, alongside higher entry fees for the auction at 110 EGP per quintal instead of 50 EGP.
Unlike the previous auction, Osman did not withdraw from the exceptional cotton auction because the alternative was a total loss or storing the cotton, which could result in a 25% price reduction due to spoilage. He decided not to plant cotton again, opting for more stable crops like rice or corn, especially since his governorate allows rice cultivation.
Before 2019, Egyptian cotton was collected from farmers by export companies and spinning companies through intermediaries and traders. The government launched a trial cotton trading system in 2019, where Egypt Cotton Ginning Company collects the crop from farmers for 50 EGP per quintal and offers it in public auctions for the highest price in each governorate. In 2021, the system was generalized across all governorates as part of the state’s plan to develop the textile industry, including setting a guaranteed price for cotton that the state would buy from farmers who failed to sell their crops to private companies within the system.
Crisis
Hussein Abu Saddam, the head of the Farmers’ Syndicate, says the crisis lies within the system itself. According to the new system, leaving the cotton price to global prices initially raised it significantly, reaching around 18,000 EGP in October. However, with the exchange rate liberalization and the dollar price drop in the parallel market from 70 to 48 EGP, the quintal price fell to around 8,000 EGP in some auctions. This led farmers to believe there was an agreement between traders and companies to lower the cotton price, prompting them to withdraw from auctions, especially since the government set a guaranteed cotton price for the next season, which will be harvested starting in September, ranging between 10,000 and 12,000 EGP per quintal.
“Cotton is a strategic commodity, and its cultivation is costly and labor-intensive, so the expected return is high. With price fluctuations, farmers turn to more price-stable crops like corn and rice,” Abu Saddam adds. When asked by Zawia3 about determining rice planting areas, he replies, “There are 300,000 acres planted annually against the regulation, and farmers pay a violation fine. In this case, farmers prefer to pay a fine not exceeding 10,000 EGP compared to the losses from cotton cultivation.”
Abu Saddam’s statements align with data from the Cotton Arbitration and Testing General Organization regarding cotton-planted areas until April 27, showing a total planted area of 57,558 acres, compared to 130,000 acres in the same period last year, according to Walid Yehia, deputy director of the Cotton Research Institute at the Agricultural Research Center, Ministry of Agriculture. The total area in the final census last June was 254,875 acres, which is unlikely this year, according to Abu Saddam.
Storage
Sayed Abdel Hafiz, a farmer in Ezbet Abu Daraz in Fowa, Kafr El-Sheikh, decided to store his cotton crop until the current season begins in September rather than selling it in the current auction at 11,020 EGP per quintal.
Abdel Hafiz says, “The government set a guaranteed cotton price for the current 2024-2025 season at around 12,000 EGP per quintal for long-staple cotton in Lower Egypt. Therefore, any auction will not be below this amount, and it’s better for me to store my crop for several months to sell it, especially since selling outside the system this year won’t exceed current auction prices due to traders’ agreement to lower the price.”
He adds, “Seed prices rose to 1,500 EGP instead of 600 EGP due to the black market dollar rate of around 70 EGP, which applies to all farming supplies and labor costs. So, I bear the cost of farming supplies priced at 70 EGP per dollar, but when selling my crop, it’s priced at around 47 EGP. Many brokers and traders currently buy quintals at auction prices to store and sell in the next season’s auctions for a higher profit. This is what I decided to do, despite the risk of my crop spoiling, but it’s a one-time gamble because I won’t plant cotton again.”
The Egyptian government had set a guaranteed price for the previous 2023-2024 season at around 4,500 EGP per quintal for long-staple cotton in Upper Egypt and 5,500 EGP per quintal in Lower Egypt.
The export rate of Egyptian long-staple cotton declined by 60% from last year due to a 24% decrease in planted areas compared to the 2022-2023 season.
Egypt aims to stop raw cotton exports by 2025, announcing its intention to reduce cotton exports to around 50% of production from the new season to cover the domestic market, which only consumes 6% of production to run local factories, while the rest of the local production is exported to 22 countries, including India, Pakistan, and China.
Global Market
Munir Rajab, a member of the Cotton Exporters Union, mentions that the season started with a high demand for cotton after raising its price to 18,000 EGP per quintal due to increased demand for Egyptian long-staple cotton in East Asian countries, the world’s largest textile manufacturing centers. He adds that with the outbreak of events in Gaza and tensions in the Red Sea, shipping costs tripled, and insurance costs on shipping increased ninefold, making cotton export costs high.
According to Abdul Azim Tantawi, former head of the Agricultural Research Center and a member of the Arab-African Water Council, cotton crops are more water-intensive than rice, which the Egyptian government has regulated since 2017 due to the Grand Ethiopian Renaissance Dam crisis, following amendments to the Agriculture Law. However, the state has not taken measures to limit cotton planting areas; on the contrary, it encourages it to support the state’s plan to develop the textile sector, which cost 22 billion EGP.
Walid El-Saadany, head of the General Cotton Producers Association, says the significant price fluctuations are due to exchange rate volatility. At the beginning of the season, exporters based their exports on the black market dollar rate of 70 EGP, and with the parallel market rate dropping to around 47 EGP, the same as the official rate, prices fell.
He adds, “The state set a guaranteed price for the new season at around 12,000 EGP per quintal, a very reasonable price considering the farming input costs have increased two and a half to three times. However, the state has yet to announce the mechanisms for implementing this price if global prices fall. We hope the state will announce mechanisms to achieve this price to assure farmers to plant cotton, especially with rumors of the government retracting this price, which will affect planted areas this and future seasons.”
El-Saadany reveals that several factors influenced recent auction price fluctuations, including regional tensions that added export burdens, state decisions to limit exports, and price increases. He dismisses rumors of traders agreeing on a specific cotton price in auctions, saying, “These are rumors spread by brokers, but traders cannot agree on a specific price,” noting that two companies dominated 90% of the cotton crop in auctions: the government-owned Egypt Cotton Trading and Ginning Company and the private Abu Madai Trading, Import, and Export Company.
Egyptian cotton export contracts have declined by 30% since the current export season began, with 42,400 tons contracted by April 20, compared to 60,000 tons in the same period last season.
The cotton export season starts in early September each year and runs until the end of August the following year. According to official data from the Egyptian Cotton Exporters Union, this season’s exports include 26,700 tons from the current season worth 95.4 million USD, and 15,700 tons from the previous season worth 54.1 million USD.
