This cotton trading season was a wild ride — here’s what went down

This year’s cotton trading season ended earlier than usual: The 2024-2025 cotton trading season wrapped up prematurely, with significant quantities of the harvest left unsold as private sector traders and exporters largely opted out of government-run auctions, a source from one of Egypt’s largest cotton trading and export firms told EnterpriseAM.

A shorter-than-usual season: Egypt’s cotton trading season usually runs from September to March, but this year it started late in October and ended prematurely in early March, with unsold stock piling up. Some 460k quintals remained unsold during the season, despite the Public Enterprise Ministry holding one extra auction than initially planned, a government source told us. The state-owned Holding Company for Spinning and Weaving ended up purchasing all what has remained unsold.

It wasn’t smooth sailing: The auction process was halted twice during the season due to a lack of private sector participation. Private traders boycotted the first three auctions due to high price guarantees that they say exceeded global rates — since most of Egypt’s cotton is exported as raw fiber, traders must remain competitive in global markets, and the high local prices made that difficult.

REMEMBER- The government paused the local trading system in November and later introduced a subsidy EGP 2k-per-quintals, which pushed a number of private players to participate in the auction that followed. However, many traders struggled to offload their purchases and eventually withdrew from future auctions. A source in the cotton trading system told EnterpriseAM that private players bought over 600k quintals across three auctions but were unable to fully resell them, prompting their complete withdrawal from the final few auctions for the season.

ICYMI- Egyptian cotton exporters and private companies have been calling for EGP 4 bn ingovernment subsidies to help farmers market their crops at a competitive price point. The rise in ins. costs and dip in export prices has led to 325 companies shutting their doors last season as they were losing EGP 2k per quintal.

It wasn’t just higher prices that hurt demand: The delayed start to Egypt’s cotton export season weighed on demand this year — the season kicked off in late December instead of early September, which prompted international buyers to look for alternative suppliers.

The numbers tell the story: Total cotton supply this season hit 114k tons, split between 98.5k tons from the season’s harvest and 16.5k tons in carryover stock from last season, according to Agriculture Ministry data seen by EnterpriseAM. With the export season now halfway through, a mere 20% of the available stock has been sold. A source with knowledge of the matter told us that the first three months of the export season are crucial — but suppliers are missing out on them due to issues with the guarantee price. “If this trend continues, we could lose the entire export season,” the source told us.

It doesn’t end there: The challenge isn’t just about purchasing the surplus cotton stock, but finding buyers post-ginning, a government source told EnterpriseAM. Egypt’s local textile factories — both public and private — consume very little of the country’s cotton, instead they rely on imported fibers, which raises concerns about how the holding company will handle the cotton it is now obligated to purchase — the holding company is obligated to buy any access cotton from farmers at guaranteed prices.

A growing stockpile is making matters worse: The Holding Company for Spinning and Weaving bought over half of this year’s output, adding on to its carryover stock of around 350k quintals of cotton gin from the 2022-2023 season.The mounting inventory could lead to substantial losses if it remains unsold and the crisis could extend into the next season if the company fails to clear out this stock, the government sources said.

The solution? To resolve this issue of pilling stock and prevent it from dragging into next season, the only viable solution is to market cotton to local mills, one of the sources we spoke to said. The government may need to introduce a subsidy of EGP 1k per quintal to bring domestic sale prices in line with imported cotton. The mills could then process the cotton for either local use or to be exported as yarn or finished textiles.