February 9, 2012

Ethiopia cancels cotton exports embargo

The government of Ethiopia has lifted the sanction that it had imposed on the export of raw cotton in October 2010.

The decision was taken at a meeting between Tefera Derbew, Minister of Agriculture (MoA) and Mekonnen Manyazewal, Minister of Industry (MoI), in view of an increase in the production of cotton in the country this year.

This year's cotton production in Ethiopia is estimated at 79,471 tonnes, much above the previous year's production of 60,000 tonnes. The local textile industries have so far only bought 22,000 tonnes, and the Ethiopian textile sector is not likely to purchase the remaining quantity in the coming months.

Analysing the situation, cotton farmers had complained to the government that a large stock of cotton is lying in warehouses, as textile mills are reluctant to purchase the same. In fact, the demand for cotton from textile industries has reduced to 60,000 tonnes from the earlier projected 68,000 tonnes, as the mills had some amount of last year's cotton in their inventory.

The huge surge in this year's cotton production can be attributed to the government's policy of supporting the sector after the agriculture sector failed to meet the local cotton demand. In October 2010, the government banned export of raw cotton as the country produced around 51,000 tonnes of cotton, as against the domestic demand of 54,000 tonnes.

The government's efforts to promote cotton cultivation resulted in an increase in the area under cotton cultivation from last year's 80,000 hectares to 111,886 hectares this year, according to MoA data.

In addition to lifting the ban on cotton exports, the Government has also made 350 million birr available in credit to cotton cultivators. The credit facility would be made available in the form of pre-shipment export loans, which have to be paid back once the export transaction is completed.