Azerbaijan’s cotton again in spotlight

Analysis Materials 26 October 2010 11:11 (UTC +04:00)

Few people know that cotton is a strategic product, used to make gunpowder and bills. It is always under government control, and sale of this material is regulated by the state. However, in recent years due to problems with the cotton growing the strategic raw material has lost its value and become unprofitable monocropping. Higher prices for fertilizers and fuels and lubricants, debt of many years to investors - not allowed making the industry profitable. Meanwhile, cotton in Azerbaijan remains one of the major products of the agrarian sector and the rise in world prices for it, will greatly expand the area of cotton fields.

Today cotton price has increased twice, and reached its highest level over 140 years: a ton of raw material on world markets rose to $1,200. So, according to last week's data, cotton prices on the New York Mercantile Exchange set a record, rising to $1.198 per pound (454 g). The reason is decrease in the harvest in several countries due to bad weather, the jump in dollar rate and speculative demand.

Prices for this agricultural crop began to grow in July. As a result of severe flooding in Pakistan, the world's fourth largest cotton producer, a large number of cotton perished. The bad weather affected a great part of the cotton plantations in China, which ranks first in the world for cotton cultivation and import. The second cotton producer in the world -India doesn't intend to lift restrictions on export of this raw material. As a result, in 2010 cotton crop in the world fell by 5.4 percent compared to the previous year. According to the forecast of the U.S. Department of Agriculture (is one of the top three world cotton producers), cotton stocks-consumption ratio will be worse over the past 15 years.

Thus, over the past three months, cotton prices grew by 56 percent, which causes concern of producers and sellers, which sooner or later will have to increase the cost for cotton goods. They are already experiencing difficulties due to rise in labor and electricity costs. In this case, retailers in many countries including the U.S., require manufacturers to decide the issue of cost increases themselves without raising the prices for finished products as the consumer market is still too weak. After all, consumers worldwide got accustomed to a fairly low cotton price over the past 20 years.

Cotton growing is Azerbaijan's traditional agricultural sector. Over the last decades of the last century, it has successfully developed, in early 1980's production of raw cotton in the country for the first time reached one million tons. Yield hit 32.8 quintal from per hectare. But since then much has changed. Low purchase prices for cotton have forced farmers to focus on more profitable sectors of crop sector. And as a result, each year area sown to cotton decreases. In particular, since the season 1991/1992 in Azerbaijan production of cotton fiber decreased. In 1993, cotton productivity in the country fell by 40 percent. Cotton production and yield in Azerbaijan.

(Source: State Statistical Committee of Azerbaijan)



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As of October 1, 2010 Azerbaijan harvested 12,125 tons of raw cotton. This year, cotton was planted on 29,967 ha. It is 42 percent more than in 2009. Growth of areas for this technical culture is related with a replaceable sowing. Cotton harvest will continue until late November. It should be noted that mostly high-yield varieties not less than 20-25 quintals from per hectare (AzNIHI-195 "," Azerbaycan AP-317 "," Genca-8 "," Agdash-5 "," Ag qizil "," Flora ") have been planted this year.

The Ministry of Agriculture in the current year forecasts harvest approximately at 35,000-40,000, but all will depend on weather conditions. In October, at the height of the harvest, the rains make it impossible for farmers to enter the field. Sowing campaign also took place in difficult weather conditions, continuous heavy rains were observed, which considerably hampered planting schedule. In addition, floods in the Kur and Araz rivers flooded about 1,400 hectares of cotton farms in the Sabirabad and Saatli regions.

However, the cotton yield decreases not only due to bad weather conditions, and also due to the fact that the republic is experiencing a serious shortage of agricultural machinery. Modern technology is in miserable quantity, and the former machinery mainly has long worn out, and its repair is not always possible. For example, to facilitate manual labor, the Azerbaijani cotton companies purchased about 30 modern cotton harvesters in the last 2-3 years.

Shortage of lubricants, herbicides also affects the yields. Thus, besides 40 manat subsidies for the purchase of fuel and lubricants, the State does not take other incentives for growth in this sector. Compared with the Soviet period, the level of mineral fertilizers has declined catastrophically. It is known that due to lack of fertilizer every boll of cotton is losing weight up to 2 grams.

The local cotton companies ("MKT Istehsalat & Kommersiya" and CTS Agro) buy crude cotton for 400 manat per ton this year, despite a record rise in world prices for these raw materials. In fact, the price never covers the cost. Thus, the amount of debt of cotton farmers only growing.

Farmers voluntarily choose what agricultural product to grow. So, in their opinion, instead of cotton, it is advisable to grow vegetables for export to neighboring countries (Russia, Ukraine), who have repeatedly expressed their interest in importing these products, as well as to grow fodder plants, which are necessary for development of livestock in the country. As for industrial crops, at this stage only the state can support and stimulate their production. For example, this year, farmers prefer to grow corn for the reason that the state gives 80 manat per 1 hectare to farmers who grow wheat, while for other types of crops, this figure is 40 manat. In this case, cotton is one of the most labor-intensive and capital-intensive sectors of agriculture, and the agro-risks of this industry are too high.

All above-mentioned reasons have led to the fact that Azerbaijan has long lost the competitive advantage in the global cotton market. So, in September 2010 Azerbaijan resumed exports of cotton, completely stopped in June-August.

According to the State Customs Committee of Azerbaijan, in January-September, cotton export made up 13.5 percent of exports for January-September 2009, and revenues from its exports fell by 83.71 percent. In January-September, 1,950.5 tons of cotton was exported, accounting for 0.01 percent of total exports ($15.7 billion) or $2,302,400. During January-September, the average export price was $1,180.42 per ton. At the same time, in September, export, which in June-August was completely stopped, amounted to 103.6 tons, amounting $57,000 for an average price of $550.19 per ton.

The figure of January is likely to remain the record as a result of 2010. So, in January 2010, cotton exports totaled 453.8 tons, amounting $571,200 at a price of $1258.772 per ton.