Production of Egyptian long-staple cotton, famously used for luxury linens, has fallen sharply since political upheaval six years ago led to less enforcement of regulations, degrading the crop's quality.
Last year Egypt banned all but the highest quality cotton seed in order to save its historic crop, dramatically reducing the area under cultivation to about 130,000 acres, a more than 100-year low.
Egypt is now looking to scale that cultivation back up. The area planted rose to about 220,000 acres this year and is expected to hit up to 500,000 acres in the next two to three years, according to cotton traders.
"The area under cultivation is growing and exports are going to grow ... and we can now sell at a price that's less than California Pima," said Nabil al-Santaricy, head of the Alexandria Cotton Exporters Association, referring to long-staple American cotton, Egypt's primary competitor.
Egypt last November floated its currency, roughly halving it in value and making its exports relatively cheap on international markets, a boon for Egyptian cotton traders able to source higher quality cotton after the new regulations.
Ahmed Elbosaty, chairman of Modern Nile Cotton, Egypt's largest cotton trading company, expects to more than double his exports to about 16,000 tonnes this year from about 7,000 in the season that ends this month.
"The idea is to regain our position in this global extra-long staple market," said Elbosaty, who sees Egypt able to more than double its global market share within three years to capture about 20 percent of a small but high-end market that trades some 500,000 tonnes of long-staple cotton per year.
Egypt's prized long-staple cotton trades at a high premium, currently around 160 cents per lb versus 90 cents for the more common short-staple cotton. This makes it a lucrative dollar-earning export for the dollar-strapped country as it looks to narrow a trade deficit that hit $42.64 billion last year.
Egyptian cotton, even lower grades, got a boost last year after a scandal involving the alleged sale of falsely labeled Egyptian cotton products by Indian textile manufacturer Welspun India, which prompted higher scrutiny among retailers.
"The scandal created demand for Egyptian coarse-count yarn. They have an export market today they didn't have before because now the retailers are very cautious. If it's labeled 100 percent Egyptian, it has to be Egyptian," said Elbosaty.
Reporting by Eric Knecht; Editing by Dale Hudson and David Holmes
Source: http://www.reuters.com/article/us-usa-economy-poll-idUSKBN1AR0G4