The absence of an independent entity, according to cotton growers, has contributed to problems they faced in accessing seeds, pesticide control, skilled labour and a rather rough market.
By Ashenafi Endale
Blen Tsegaye is a major shareholder and manager at Blen Tsegaye Business & Industry, a cotton grower that has been operating in Afar for the past seven years. The company has 1,500ha of land in Afar Regional State.
Blen says he has seen the good, the bad and the ugly moments. But, this time it is different, he feels. The company has 4,200ql of cotton in stock, for which it was unable to find a buyer. This is out of a total of around 12,000tns harvested between September to December 2012.
The September to December 2012 harvest was half of the 25,000ql harvested the previous year. The latest harvest, starting in the coming September, could also be around half of this last harvest
“Although our company produced lower than the previous year, it is difficult for us to find buyers these days,” Blen told Fortune. “Even when we get one, they buy in small amounts.”
If sold out, he could have made 12.2 million Br from the cotton in stock, he says. Currently, he sells a kilo of cotton for 29 Br.
The international market offered 2.2 dollars. In March 2013, cotton was selling for 3.95 dollars a kilo, while locally the growers were selling it for 47 Br, on average.
I expect a lot less production in the coming season, since we do not have enough money to prepare, Blen said.
Blen’s rather gloomy picture of the next cotton harvest season is also true for Ethiopia – a country that is expecting only 80,000tn for the next season from 125,000ha of land. This is despite the fact that the demand for cotton in the next season is estimated to be around 95,287tn. Such output is only slightly better than it was 30 years ago, when only state farms were in production under a military-Marxist regime.
Prior to 1967, Ethiopia had large-scale commercial cotton plantations in the Awash Valley and the Humera areas. Tendaho Cotton Plantation, in the lower Awash Valley, was one of Ethiopia’s largest cotton plantations. Rain-fed cotton also grew in Humera, Bilate and Arba Minch.
Since 1967, most commercial cotton has been grown on irrigated state farms, mostly in the Awash Valley area. Production jumped from 43,500tns, in 1974/75, to 74,900tns in 1984/85. Similarly, the area of cultivation increased from 22,600ha, in 1974/75, to 73,900ha in 2007/08.
Today, it is estimated that there is 2.6 million hectares of land suitable for cotton production. Demand and supply have been at odds since 2009, however, when the total national output was a meagre 21,000tns – one of the lowest figures ever. The total area harvested then was 42,371ha. That landmark year, the demand, 45,000tns, was more than twice the supply.
Ethiopia claims to have as much cotton production as Pakistan, the fourth largest producer in the world, after China, the US and India. Pakistan harvests 2.5 million to 3.5 million tonnes a year from 2.9 million hectares, according to a study conducted by the Ethiopian Investment Agency (EIA).
Despite this huge potential, things would slightly improve for Ethiopia in 2010/11. At this time, they produced 51,000tns, falling short of the demand of the textile industry by 3,000tns.
The following year, 2011/12, the total production stood at 79,710tns. The demand was forecast to be 85pc of this, or 67,753tns. Eventually though, textile factories could only buy 50,000tn, 17,753tns lower than the demand. The producers were left with a surplus of 29,710tns.
In November 2010, the government banned the export of cotton, promising the growers that they would still be able to sell their cotton at an international rate of 42.78 Br a kilo. When the surplus production piled up, the export ban was lifted.
The lifting of the ban did not lead to bigger exports, however, as the result of stringent requirements put in place by the government and the procedures that were set in place. These were adopted in order to protect the textile factories from shortages, but ended up affecting the growers, according to Gebreegziabher Kidane, a senior expert at the Agricultural Investments Directorate at the Ministry of Agriculture (MoA).
“I am discouraged by the difficulty and the long processes involved in exporting cotton,” said Blen.
Ethiopia only secured 4.1 million dollars from cotton exports in the 2012/13 fiscal year, by exporting 2,460tns. This was much lower than the revenue gain prior to the crisis.
To the dismay of Blen and the 1,119 other cotton growers in the country, however, the projection for 2012/13 seems to be no different.
The MoA has planned to increase the cultivated land of cotton to 125,000ha and produce 80,000tn of cotton, according to data obtained from the Ministry. This is for the projected 95,287tn of cotton calculated to be in demand. This figure is based on the production capacities of the 19 textile factories, which total 79,409tn of yarn on a yearly basis.
The fluctuation of cotton production was largely attributed, by most of the cotton growers Fortune talked to, to the absence of a regulatory body.
The problem has been created by the absence of a regulator for the sector and a lack of coordination among the different government institutions, Blen told Fortune.
Although a bill was drafted four years ago to establish a regulatory body, it was not implemented until three weeks ago.
After amending the proclamation for the establishment of the Textile Industries Development Institute (TIDI), the government decided to move the regulatory function of cotton from the MoA to the Ministry of Industry (MoI).
Established in 1999, the TIDI is one of the catalysts towards achieving the textile industry sub-sector’s goals set by the Government in its five years Growth & Transformation Plan (GTP). The plan targets the generation of one billion dollars from the export of textile products by the end of 2015. This would be a leap from the 23.2 million dollars registered in 2010.
“Cotton has been seen just like any other plain crop, after it was put with other three crops at the directorate at the MoA,” said Gebreegziabher.
The number of experts and normal workers at the new regulatory body is 70 now, up from the two at the MoA.
“Currently, the new staff is taking data from the MoA,” said Gebreezgzaibher, who is a member of the steering committee, established to oversee the transition.
However, a member of the Ethiopian Cotton Producers, Ginners & Exporters Association who requested anonymity, said this is not the ultimate solution for the lingering problem.
Establishing a federal authority responsible for the cotton industry is the only solution for the problem, according to the member of the association.
The call for a standalone authority is not new, although the renewed voice was reinforced due to a recent surplus of production from what was projected.
A year ago, unable to emerge from the paralysis in the market, aggravated cotton growers asked the government to establish an independent body to monitor and coordinate their activities, along with other sectors, such as textiles.
Although the government seems to respond to our request, many growers still feel neglected by policymakers, since their demand is not fully addressed, said the member of the association.
“They would rather see a federal agency formed for the entire horticultural industry,” said Gebreegziabher.
Although the government seems to have addressed the problem of the local cotton market, which has seen ups and downs over the past three years, it is still not enough, according to an expert who is working in the sector, under anonymity. ‘‘The fluctuation in production rate was largely due to the absence of seeds, pesticides and credit facilities, as well as land lease problems. A low level of mechanisation and a shortage of sulphuric acid also contributed.’’
Handling all these issues needs vast resource and capacity, said the expert.
Assefa Aga, president of the Ethiopian Cotton Producers, Ginners & Exporters Association, also agrees with the expert.
“Although it is good, the textile sector does not move to the industry level just by moving a regulatory body from the MoA to the MoI. Other major factors in cotton production, such as chemicals and fertiliser, are still under the MoA,” said Assefa.
This is especially important for growers like Blen. Half of the cotton he harvested a while back was affected by disease.
The absence of an independent entity has contributed to the problems faced by growers, in accessing seeds, pesticide control, skilled labour and a rather rough market, said the expert.
“All of these problems should be given balanced attention from the government,’’ he suggested.
“Although the amended proclamation entitles the TIDI to provide land for investors, it’s implementation is ambiguous,” said Gebre. “All land is under the MoA and I am not sure how they are going to issue it.”
The lack of coordination between different government agencies may decrease the output of the sector further, since most of them are trying to switch to other oil seeds, said the expert.
However, Blen is determined to stay in the sector as long as he can.
“I have no choice. I cannot move to any grain or simply make the machineries idle, by stopping the cotton production,” he commented.
Sourced: http://addisfortune.net/articles/cotton-industry-in-a-spin/
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