Addis Fortune (Addis Ababa)

30 December 2012

Ethiopia: Cotton Production Falls Below Textile Industry Need

Cotton supply falls short by tens of thousands of tonnes, as a result of market problems faced during the previous fiscal year.

The decrease in supply was disclosed during the general assembly of the Ethiopian Cotton Producers, Ginners and Exporters Association (ECPGEA), at the Sheraton Addis Hotel, on December 25, 2012. The meeting was attended by government officials, including; Tadesse Haile, state minister for the Ministry of Industry (MoI) and Wondirad Mandefro, state minister for the Ministry of Agriculture (MoA).

Demand for the textile industry, in the 2012/13 fiscal year, is 60,000tn. Supply, however, is short by 23,000tn, according to government estimates. The Cotton Association, on the other hand, says that the shortfall is actually larger than the government estimated.

Growers produced a surplus of 11,741tn, in 2011/12, in addition to the expected demand of 68,000tn. The textile sector, however, didn't buy what they had produced, as had been expected.

Textile factories complained about financial problems and only purchased 22pc of the cotton produced, as of March 2012. The government, thus, lifted the export ban on cotton which had been in place since 2010. The lifting of the export ban did not help the growers much, as the international market was in financial crisis.

In March 2012, a kilogramme of cotton was sold at 2.2 dollars, in the international market, down from 3.95 dollars for the same time the previous year, according to the United States Department of Agriculture (USDA). However, growers managed to export only 1,971tn of cotton, for 3.1 million dollars, in the first quarter of 2011/12.

The growers complained, at the time, to both the MoA and the MoI, that they did not have the working capital to proceed with plantation, between March and May.

The government also established a committee, in which the MoI, MoA, Ethiopian Textile & Garment Manufacturing Association (ETGMA) and Cotton Association were involved, in order to put pressure on the textile factories to buy cotton. This, however, did not ease the growers' frustration, hence, most growers switched to other crops. There is still around 1,200ql of cotton that has not yet been sold, according to the Cotton Association.

On top of this, around 1,600ha of land in Gewane, in theAfarRegionalState, which was planted with cotton worth 60 million Br, was damaged by floods in August, 2012.

This has shifted the concern to textile factories.

Kombolcha Textile S.C, which exports bed sheets, towels and pillowcases, has a stock of cotton that can be used for up to three months.

"The growers should give priority to the local market in selling the limited cotton," said Mustefa Jemal, managing director of Kombolcha.

The MoI agrees that, although the export ban is lifted, the local demand must be served first. A grower should also get approval from the MoA and the Textile Industry Development Institute (TIDI), in order to export their cotton. Even if growers were able to export cotton without meeting the local demand the international market forecast for cotton is not looking good.

A kilogramme of cotton might be sold at an average price of 1.8 dollars, in the international market, which is less than the 1.95 dollars in 2011, according to the Global Cotton Growers Association forecast. The price reduction is forecasted, because cotton production is estimated to increase by 16pc.

The growers say that an intermittent ban could lead to international buyers relying less on Ethiopian cotton. Some even suggested that the government was better off leaving the sector alone.

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