Cotton came to the forefront of the agriculture sector last year when local supply was not enough to meet demand from local textile and garment manufacturers. What little cotton was available was being exported as its price in the international market skyrocketed.
The international price continued to rise unabated reaching 73 Br per kilogramme, while the local set price, which was adjusted, stood at 57 Br per kilogramme. However, the international price for cotton drastically decreased in the past couple of months.
Two weeks ago, the Ethiopian government lifted the price cap. However, the demand for cotton in Ethiopia is so high as to have increased from 57,000tn to 76,000tn in 2011, a 33pc increment from the previous year.
The supply is estimated to reach 193,146tn in 2014/15, according to the five year strategic plan of MoA. This may explain why cotton has received priority.
The MoA leases a minimum of 3,000ht of land and a maximum of 25,000ht for cotton growers. An investor is required to show a bank statement of one year which shows a balance of 30pc of the reinvestment and the audit report of the company and an environmental impact assessment study report along with the business plan. Foreign investors and people from the Diaspora are required to get a support letter from the Ethiopian Embassy located where they live.
To date, 93,985ht of land is covered with cotton, of which 26,377ht are held by private investors and the rest by local farmers.
“If cotton covered areas produce and demand is met, it might lead to lifting of the export ban,” Berhanu told Fortune.