In April 2012 the Government of Ethiopia lifted a ban it had imposed in October 2010 on the export of cotton.
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
Date: July 6, 2012
GAIN Report Number: ET 1204
Post: Addis Ababa
Ban on Cotton Exports Lifted
Cotton and Products
In April 2012 the Government of Ethiopia lifted a ban it had imposed in October 2010 on the export of
cotton. The ban was imposed because of the government’s desire to expand domestic textile
production, and its assumption that textile growth would lead to an impending shortage in the supply of
cotton. However, measures employed by the government over the past one and one-half years have
succeeded in increasing cotton production levels, while at the same time outside competition led to a
contraction in the domestic textile industry and a consequent drop in domestic cotton demand. Because
of the excess supply of cotton, the ban was officially lifted, but the cumbersome approval process put
into place has resulted in very few actual exports.
Cotton production a government priority
The government of Ethiopia’s ambitious five-year Growth and Transformation Plan (GTP) gives
special emphasis to export industries, including the textile and garment sector. Therefore, cotton
production is a high priority, and the Ministry of Agriculture (MOA) aims to increase the current
production level more than twofold, to 193,000 tons, by 2015. By the same time, plans are to
increase export earnings from the textile industry to $100 million, a dramatic threefold increase
from the 2011 level of $23 million.
To achieve these goals, the government (which owns all land in Ethiopia) is leasing large plots of
land to investors at low prices, with priority given to cash crops. Of the 3 million hectares of land
that the government has targeted for cotton production, 2.6 million hectares have been identified and
made available to private investors for long-term leasing, specifically for cotton. Of that amount,
less than five percent has been planted to cotton to date, leaving much room for growth.
Supply and Demand of Raw Cotton in Ethiopia
Marketing Year Cotton growing land (ha) Cotton production (MT) Local Demand (MT)
2010/11 80,000 60,000 60,000
2011/12 111,886 79,421 60,000
Source: MOA & Central Statistics Authority (not confirmed by FAS Addis Ababa)
In addition, MOA is also encouraging small-scale farmers to shift from sesame, which grows in
many of the areas suitable to cotton, to cotton production, and has a special $20 million credit line
which cotton growers can access by producing a contract with a domestic textile and garment firm
that will export its product. Loans are to be repaid after collection of sales proceeds.
Exports banned in 2010 due to short supply
The Ethiopian government banned exports of raw cotton in October 2010, despite the much-needed
hard currency that these exports brought in. The ban was imposed because of high international
cotton prices and because the government anticipated an increased demand from the local textile and
garment industry. To compensate cotton growers, the government promised that cotton would be
sold in local market at international prices, adjusted for freight and transportation costs.
Value of Cotton Export
(Millions of US Dollars)
Marketing Years (Sept-August)
Commodity 2006/07 2007/08 2008/09 2009/10 2010/11
Cotton 14.3 19.2 5.8 10.6 0.5
Source: Ethiopian Customs and Revenue Authority
A team of government institutions, comprising the Ministry of Agriculture, the Ministry of Trade
(MOT), and the Ethiopian Textile Industry Development Institute (ETIDI), set the local selling price,
and promised to review this price on a quarterly basis to ensure consistency with international prices.
Originally set at 42.78 Birr ($3.21) per kilogram in November 2010, the price was raised to 57 Birr
($3.43) in February 2011. Following a significant decline in world prices, the government removed
the price cap on cotton in August 2011.
Government allows export of raw cotton
Ethiopian cotton production has increased considerably since the introduction of government
incentives mentioned above. However, rather than expanding domestic textile production, as the
government expected, Ethiopian textile companies in fact contracted somewhat, due to increasing
competition from textiles from other countries, especially China. With large stocks of raw cotton
carried over from last year, the local textile industry has bought so far only 22,000 tons of raw cotton
in the first three-quarters of this marketing year, substantially lower than available local production.
Because of this, after months of lobbying by cotton growers, the government lifted the ban on cotton
exports, effective April 2012. The MOA, the National Bank of Ethiopia (NBE), and ETIDI continue
to monitor the trade, to ensure that Ethiopian export prices of cotton are not less than the prevailing
international market price. Furthermore, in order to export, cotton exporters must first get permission
from three separate government agencies (MOA, MOT, and NBE). This burdensome procedure has
discouraged exporters, with the result that very little cotton has been exported despite the lifting of
the ban, and cotton growers continue to complain about the situation.