Cotton Commodity Study

Development Bank of Ethiopia
Research Process
COTTON COMMODITY Study
Prepared by: Case Team 3

Team Members:
Adamu Legesse: Principal Re. Officer
Teshome Kelbesa: Senior Re. Officer
Sisay Biru: Research officer
Habtamu Asfaw: Junior Re. Officer
Date: 23/06/2009
1. INTRODUCTION....................................................................................................1
1.2. BACKGROUND.....................................................................................................................................................1
1.2. OBJECTIVE OF THE STUDY...................................................................................................................................2
1.2.1. General objective...........................................................................................................................................2
1.2.2. Specific Objectives.........................................................................................................................................2
1.3. METHODOLOGY OF THE STUDY..................................................................................................................................2
1.3.1. Sources and methods of data collection.........................................................................................................2
1.3.2. Method of analysis.........................................................................................................................................2
1.4. THE SCOPE OF THE STUDY.........................................................................................................................................2
2. COMMODITY DESCRIPTION...............................................................................................................................3
2.1. CLASSIFICATION OF COTTON..............................................................................................................................3
3. MAJOR INPUT OF THE COMMODITY..............................................................................................................7
3.1 COTTON SEED..............................................................................................................................................................8
3.1.1 Sources of raw materials.....................................................................................................................................8
3.1.2 Characteristics of raw materials.........................................................................................................................9
3.1.3 Demand and supply of improved cotton seed....................................................................................................10
3.1.4 Constraints of cotton seed.................................................................................................................................13
3.2 PESTICIDES AND FERTILIZERS....................................................................................................................................13
3.2.1 Pesticides...........................................................................................................................................................13
3.2.2 Fertilizers..........................................................................................................................................................16
3.2.3. Marketing Arrangements for Pesticides & Fertilizers.....................................................................................17
3.2.4 Constraints of Pesticides and Fertilizers..........................................................................................................18
3.3. PACKING MATERIALS...............................................................................................................................................18
Source: Research survey, 2009..................................................................................................................................19
3.3.1 Constraints of Packing Materials......................................................................................................................19
4. THE PRODUCTION PROCESS AND TECHNOLOGY SELECTION............................................................20
4.1. LAND DEVELOPMENT........................................................................................................................................20
4.3. GROWING OF COTTON.......................................................................................................................................23
4.4. HARVESTING.....................................................................................................................................................31
4.5. RAW COTTON STORAGE....................................................................................................................................32
4.6. GINNING............................................................................................................................................................32
4.7. CLASSING..........................................................................................................................................................32
4.8. COTTONSEED.....................................................................................................................................................33
5. MARKETING STUDY OF RAW COTTON........................................................................................................34
5.1. GENERAL..................................................................................................................................................................34
5.2. MARKET SEGMENTATION FOR COTTON...................................................................................................................35
5.3. WORLD COTTON CONSUMPTION...............................................................................................................................36
5. 4. WORLD PRODUCTION..............................................................................................................................................37
5.5. WORLD COTTON TRADE...........................................................................................................................................39
5.5.1. World Cotton Import........................................................................................................................................39
5.5.2. World Cotton Export........................................................................................................................................40
5.6. REGIONAL COTTON PRODUCTION PERSPECTIVE......................................................................................................41
5.7. REGIONAL RAW COTTON IMPORT /EXPORT.............................................................................................................42
5.8. DEMAND AND SUPPLY OF RAW COTTON IN ETHIOPIA.............................................................................................43
5.8. MARKETS & MARKETING ARRANGEMENTS FOR RAW COTTON..............................................................................48
5.9. COTTON MARKETING CHANNEL...............................................................................................................................51
5.10. STORAGE FACILITY FOR THE PRODUCT..................................................................................................................53
5.11. PRICES TREND DEVELOPMENT...............................................................................................................................53
5.12. COTTON QUALITY STANDARD FOR COTTON MARKETING.....................................................................................60
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6. ORGANIZATION, MANAGEMENT, AND MAN POWER REQUIREMENT...............................................63
6.1. ORGANIZATION AND MANAGEMENT.................................................................................................................63
6.2. MAN POWER REQUIREMENT.............................................................................................................................66
6.2.1. SKILLED MANPOWER........................................................................................................................................66
6.2.2. Unskilled Manpower Requirement...............................................................................................................66
6.2.3. Incentive Schemes........................................................................................................................................67
7. ENVIRONMENTAL AND SOCIO ECONOMIC CONSIDERATIONS OF COTTON PRODUCTION......70
7.1. ENVIRONMENTAL CONSIDERATIONS.................................................................................................................70
7.1.1. Land Preparation.........................................................................................................................................70
7.1.2. Irrigation......................................................................................................................................................71
7.1.3. Pesticide and Fertilizer Application............................................................................................................72
7.1.4. Cotton Production, Occupational Health and Safety..................................................................................74
7.2. SOCIO-ECONOMIC IMPACT OF FLORICULTURE PRODUCTION............................................................................74
7.2.1. Positive Impacts...........................................................................................................................................74
Employment Creation.................................................................................................................................................74
7.2.2. Negative Impacts of Cotton Production.......................................................................................................77
8. KEY DRIVERS, SUCCESS FACTORS; PROBLEMS AND CONSTRAINTS................................................78
8.1. KEY DRIVERS....................................................................................................................................................78
8.3. CONSTRAINTS AND RISK, MAJOR PROBLEMS FACTORS OF THE INDUSTRY......................................................80
8.3.1. Major Risks and Constraints........................................................................................................................80
9. THE MAIN ACTORS OF THE INDUSTRY........................................................................................................84
9.1. MINISTRY OF AGRICULTURE AND RURAL DEVELOPMENT..............................................................................84
9.2. MINISTRY OF WATER RESOURCES AND DEVELOPMENT...................................................................................84
9.3. AGRICULTURAL RESEARCH INSTITUTIONS......................................................................................................84
9.4. REGIONAL LOCAL GOVERNMENT INSTITUTIONS..............................................................................................85
10. OPPORTUNITY AND THREATS OF THE OF FIRMS IN THE INDUSTRY...........................................86
10.1. OPPORTUNITY AND THREATS AT NATIONAL LEVEL..........................................................................................86
10.2. OPPORTUNITY AND THREATS AT GLOBAL LEVEL.............................................................................................86
11. CONCLUSION AND RECOMMENDATION………………………………………………...……………..85
12. PARAMETERS, TECHNICAL COEFFICIENTS AND BASIC ASSUMPTIONS.....................................90
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1. INTRODUCTION
1.2. Background
The Ethiopia economy is dominated by agriculture that accounts for ever 50% of its GDP, 90% of its
export earnings, and 88% of the labor force. It is also supplies food to urban areas and raw materials
to the manufacturing sector. A variety of crops are grown seasonally in different part of Ethiopia,
consisting of coffee, cotton, cereals, pulses and oil seeds. The main cash and industrial crops are
coffee, cotton, fruit, vegetables, etc. It is estimated that crop production and the livestock husbandry
account for ever 86% of agricultural GDP contribution.
Ethiopian has immense potential for the production of cotton (about 2.6 million ha), but only about
122,000 hectare or some 5% of the potentially areas is under cotton in the year 2006/07. Out of the
total 2.6 million hectare of land suitable for cotton produftion,1.7 million hectare or 65% of it found
in 38 high potential cotton producing areas and the remain 0.9 million hectare or 35 of it is in 75
medium potential districts. Despite this immense potential, Ethiopia currently produces only about
139,650 MT of raw cotton annually from a total cotton area of 122,000 hectare in the year 2006/07.
Presently, most the cotton production comes from state farms and private commercial farms. There
were five state owned enterprises producing cotton in the country. Theses were Tendaho (lower
awash), Middle Awash, Upper Awash, North Omo and Abobo. Currently, most of these farms are
transferred to private investors on rented basis.
The system of production and the technology employed in cotton production varies from producer to
producer thereby production and productivity from different cotton producers in the country. The
stated owned and currently rented farms relatively use improved cultural practices and technology
and as a result, the productivity per hectare in irrigated farms rages from 2 to 3 MT while it is 1.5 to
2 metric ton in rain-fed farms. The small holders farmers, although participate in large numbers in
cotton production, use traditional and backward farming practices to produce some 0.8 MT of raw
cotton per hectare. Ethiopia grows relatively good raw cotton with a fiber length of 27-
28mm.Generally speaking; there is the potential to produce first class cotton in the country, if
produces ensuring stable standard of quality are in place.
1.2. Objective of the study
1.2.1. General objective
The study is generally stressed to make commodity study of irrigated cotton farming in Ethiopia.
1.2.2. Specific Objectives
 To make assessment on the availability of raw materials and other technical inputs
 To determine the production process of cotton
 To undertake market analysis of raw cotton with the view of international, regional and national
perspectives
 To determine managerial and other staff requirement of cotton farms beyond investigating the
availability of skilled and unskilled man power.
 To analysis the impact of cotton farming on the environment and the mitigating mechanisms that
have to be employed.
 To investigate the socio-economic impact of cotton farming at national perspective
 Lastly but not the least, to determine the technical parameters which can be used in project
analysis
1.3. Methodology of the Study

1.3.1. Sources and methods of data collection
In the study both primary and secondary data are used. The primary data have been collected using
interview and questionnaires where as secondary data have been gathered from different published
materials available in the library and browsing from internet.
1.3.2. Method of analysis
Simple descriptive statistics have been employed in analysis of the study which includes percentage,
ratios, average annual growth rate and etc.
1.4. The Scope of the Study

The study is exclusively focused on the production of raw cotton in Ethiopia which would be
undertaken under commercial farming. In the cotton value chain, the focus of the study is confined
only on the production of raw cotton.
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2. COMMODITY DESCRIPTION
Cotton is a shrubby plant that is a member of the Mallow family. Its name refers to the cream-
colored fluffy fibers surrounding small cottonseeds called a boll. The small, sticky seeds must be
separated from the wool in order to process the cotton for spinning and weaving. De-seeded cotton is
cleaned, carded (fibers aligned), spun, and woven into a fabric that is also referred to as cotton.
Cotton is easily spun into yarn as the cotton fibers flatten, twist, and naturally interlock for spinning.
Cotton is the most universally comfortable, breathable and softest of all the fibers, natural or
manmade. Cotton batting has been the mattress fill of choice for decades. Cotton fabric alone
accounts for fully half of the fiber worn in the world. It is a comfortable choice for warm climates in
that it easily absorbs skin moisture.
The cotton plant is a source for many important products other than fabric. Among the most
important is cottonseed, which is pressed for cottonseed oil that is used in commercial products such
as salad oils and snack foods, cosmetics, soap, candles, detergents, and paint. The hulls and meal are
used for animal feed. Cotton is also a source for cellulose products, fertilizer, fuel, automobile tire
cord, pressed paper, and cardboard.
Classification of Cotton
Cotton can be classified as conventional and certified organic cottons based on chemical application.
a. Conventional (also known as traditional or commercial)

It is ordinarily one of the crops most heavily sprayed with pesticides. To bring this delicate plant to
harvest, it is heavily sprayed 30 to 40 times a season in extreme cases with pesticides so poisonous
they gradually render fields barren. Worldwide, conventional cotton farming uses only about 3%
of the farmland but consumes 25 percent of the chemical pesticides and fertilizers.
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b. Certified organic cotton
It is cotton grown in fields where the use of pesticides have been discontinued for at least 3 years
and where rigorous controls help rebuild the soil's natural fertility. Organic farming is a farming
system which relies on natural inputs only. No synthetically produced pesticides or fertilizers are
used. Mother Nature is allowed to have much more of an influence. Beneficial insects are allowed to
flourish to keep pest insects in check. Crop rotations with legumes help maintain fertility and soil
microbiology. Weeds are controlled with precision tillage and the old fashioned hoe. The successful
organic farm requires much more intensive and innovative management.
Cotton can be classified also using the quality factors like fiber length, high volume and
length uniformity.
Fiber Length
Fiber length is the average length of the longer one-half of the fibers (upper half mean length). It is
reported in both 100ths and 32nds of an inch (see conversion chart below). It is measured by passing a
"beard" of parallel fibers through a sensing point. The beard is formed when fibers from a sample of
cotton are grasped by a clamp, then combed and brushed to straighten and parallel the fibers.
Fiber length is largely determined by variety, but the cotton plant's exposure to extreme
temperatures, water stress, or nutrient deficiencies may shorten the length. Excessive cleaning and/or
drying at the gin may also result in shorter fiber length. Fiber length affects yarn strength, yarn
evenness, and the efficiency of the spinning process. The fineness of the yarn which can be
successfully produced from given fibers is also influenced by the length of the fiber. Most of the
cotton cultivated in the Ethiopia is medium-staple cotton that grows in the low land areas of the
country.
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Table 2.1: Upland Length Conversion Chart
Inches 32nds Inches 32nds
0.79 & shorter 24 1.11 - 1.13 36
0.80 - .85 26 1.14 - 1.17 37
0.86 - .89 28 1.18 - 1.20 38
0.90 - .92 29 1.21 - 1.23 39
0.93 - .95 30 1.24 - 1.26 40
0.96 - .98 31 1.27 - 1.29 41
0.99 -1.01 32 1.30 - 1.32 42
1.02 -1.04 33 1.33 - 1.35 43
1.05 -1.07 34 1.36 & longer 44 & longer
1.08 -1.10 35
Source: www.cotton.com
Length Uniformity
Length uniformity is the ratio between the mean length and the upper half mean length of the fibers
and is expressed as a percentage. If all of the fibers in the bale were of the same length, the mean
length and the upper half mean length would be the same, and the uniformity index would be 100.
However, there is a natural variation in the length of cotton fibers, so length uniformity will always
be less than 100. The following table can be used as a guide in interpreting length uniformity
measurements.
Length uniformity affects yarn evenness and strength, and the efficiency of the spinning process. It
is also related to short fiber content (fiber shorter than one half inch). Cotton with a low uniformity
index is likely to have a high percentage of short fibers. Such cotton may be difficult to process and
is likely to produce low-quality yarn.
Table 2.2: Uniformity standard

Degree of Uniformity HVI Length Uniformity Index (Percent)
Very High Above 85
High 83-85
Intermediate 80-82
Low 77-79
Very Low Below 77
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2.2 Agro-Climatic Requirement of the Crop
According to Ethiopian Agricultural Research Institute, cotton requires the following agro-climatic
situation for growing.
Climate: Cotton is a crop of subtropical climate. Cotton can grow between temperature range of
180C and 430C; however, it needs temperature range of 27 0C and 320C for best production.
An annual rainfall of at least 700 mm is minimum requirement and can go up to 1000mm for cotton
cultivation unless it is grown on irrigated soils. Ultimately rains and the heavy humid weather during
later stages of cotton cultivation may spoil the produce, lower its ginning properties or promote
attack of insect, pest, diseases. Hence weather should be clear at harvesting stage because rain at this
stage will discolor the lint and reduce its quality. Cotton by its nature requires warm and frost free
180days for maximum production.
Soil: Cotton needs a soil with excellent water holding capacity and aeration and good drainage as it
cannot withstand excessive moisture and water logging. The major groups of soil for cotton
cultivation are the alluvial soils, black soils, and red sand loam. The recommendable soil PH is from
6 to 7.
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3. MAJOR INPUT OF THE COMMODITY
Generally, the major input materials which are used in the cotton farms are the following. Theses are
 Improved cotton seed

 Pesticides
 Fertilizers
 Packing materials
 Utilities (water, electrical energy ,fuel and others)
 Other auxiliary materials
Taking these raw materials, this section of the study discuss about their sources, characteristics and
availabilities. Most of the above farm inputs are secured from domestic sources, while fertilizer &
part of chemicals are imported from aboard indicated below in the table 3.1.
Table 3.1 sources of major inputs
Sources
Description
Domestic Imported
Improved seed 
Pesticides  
Fertilizers 
Packing materials 
Source: Research survey, 2009
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3.1 Cotton seed
The availability of improved cottonseed varieties is giving more emphasis in the production of high
yield cotton. Thus, cottonseed selection mainly bases the adaptability, productivity & yield quality of
cottonseed.
According the information gathered from some cotton farm in Ethiopia, the cotton seed varieties are
selected based on the following criteria.
o High Productivities /best yield/

o Quality of the cotton seed such as stable length, color and etc
o Adaptability of the crop
3.1.1 Sources of raw materials
In the table3.1 it has been verified that the types of varieties currently used in some commercial
cotton farms of Ethiopia are DP-90, SJ2, and Acala SJ 2.
Table:-3.2 sources of improved cottonseed
Description Domestic Import

DP-90  -
Acala SJ-2  -
Source: Research Survey, 2009
Currently, Cotton seed varieties released suitable for irrigated and rainfall is 13 and 5 varieties,
respectively. Out these released varieties 3 is currently operational for irrigating and the reset 2 are
for rainfall. There are also 3 released varieties suitable for irrigated even though theses are not under
cultivation. Table 3.3 shows the detail of cotton seed varieties released for cotton production
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3.1.2 Characteristics of raw materials
Table: - 3.3. Characteristics of cotton cultivars
For irrigated areas

Raw cotton Lint 50% Span
Fiber strength Present status
yield yield 2.5% of
Name of Years of Days to
span Length Length Released for
varieties release (Ib/square inch) mature
(q/ha) (q/ha) (mm) (mm)
Middle Awash &

Under
Acala SJ-2 1997 32.5 11.09 28.62 13.50 79.34 140-160 Also has wide
production
adaptation
Middle Awash &

Deltapine- Under
1982 38.5 13.41 27.70 13.21 77.30 130-160 Also has wide
90 production
adaptation
Middle
Cocurova Under
1987 52.8 20.86 26.98 12.60 74.63 130-140 Awash ,Lower
1518 production
Awash & Kobo
130-140 Not Under Middle Awash &

Cu-okra 1987 49.5 19.48 26.11 12.14 75.66
production Upper Awash
Carolina 130-140 Not Under Arbaminch , Upper

1987 49.6 19.11 27.16 12.55 77.64
Queen production Awash& Kobo
Stonevilla- Not Under

1991 38.5 14.80 27.85 13.45 72.72
1324 production
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For rain fed areas
Under
Araba 1980 35.8 30.32 30.32 14.31 79.74 150-180 Gambella
production
Under
Bulka-202 1982 29.9 28.05 28.05 13.30 78.34 140-170 Gambella
production
Source: Ethiopian Agricultural Research organization, 2004
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3.1.3 Demand and supply of improved cotton seed
A) Demand for improved cotton seed
As per the information obtained from Ethiopian agricultural research, seed rate for mechanically
delineated seed is raging from 30-45 kg per hectare which has an average of 37.5 kg per hectare. In
the case of chemical (acid) delinted seed it is given to be 15-20 kg per hectare which has an average
requirement of 17 kg per hectare using drill sowing system in both cases where as for hill drop
sowing it is 20 kg per hectare. But the overall average seed requirement per hectare in drill sowing
system is the aggregate average of seed requirement per hectare which is 27.5 kg while it is 20 kg
seed rate per hectare for hill drop system. Since most of the Ethiopian commercial cotton farms use
hill drop system, 20 kg per hectare is used in this analysis.
Table 3.4 demonstrates that the total areas under cotton and its equivalent requirement of improved
seed under review years. Taking areas under cotton trend and 20 kg seed cotton per hectare, it is
manipulated the requirement of cottonseed correspondence to the cultivated land under cotton
farming in Ethiopian.
Table:-3.4 Area under cotton cultivation & seed requirement
Year Areas under cotton (ha) Seed/ha Seed requirement % change

2003/04 110,000 20 2,200,000
2004/05 125,000 20 2,500,000
14%
2005/06 120,000 20 2,400,000
-4%
2006/07 122,000 20 2,440,000
2%
Average
4%
Sources: New Commodity study of Textile, 2008
Based on the past areas under cotton, the future cotton seed requirement is forecasted using an
average growth rate of 4% per annum, provided the fact that other thing going stable and the trend is
assumed to continue as it is. The projected area under cotton and its cotton seed cotton requirement
prove that it is not more than the total potential areas suitable for cotton farm (2.6 million ha).
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Table: - 3.5. Projected seed requirement of cotton farm
Year Projected area under cotton Annual requirement (In kg)

(ha)
2009/10 137,233 2,744,668
2011/12 142,723 2,854,455
2012/13 148,432 2,968,633
2013/14 154,369 3,087,378
2014/15 160,544 3,210,874
2015/16 166,965 3,339,308

Source: Case team manipulation
B) Supply of cotton seed

The institution involved in the conservation of genetic resources (gene banks), improvement
(breeding programs) and seed supply (seed programs) together from a formal seed system that runs
parallel to the informal system. The Formal system evolved following the discovery of ‘genes’ and
‘genetics’ and with the increase in knowledge about manipulating the characters of plants through
Selection and crossing. Breeding became a specialized activity, taking place in research stations and
carried out by breeders/researchers. Gene banks were setup as institutions to collect and maintain
genetic resources to readily supply them to breeders. Seed programs were designed to enhance the
adoption and diffusion of breeders’ varieties to the farmers in the form of quality seed.
Formal seed production was not systematically organized until the ESE (Ethiopian seed enterprise)
acquired the first two basic seed farms in 1989.This made it possible to introduce a generation
system into seed production and helped in defining the role of other stakeholders in the seed
industry. During the last eight years, the ESE’s seed sales have been dominated by wheat and maize,
which account for more than 90% of sales. The ESE is the major seed producer in the formal seed
system, and owns four seed farms where it produces largely pre-basic seeds of different crop
verities. These farms, however, could not produce all the required early generation seed, due to
limitations in crop adaptation. Therefore, the EIAR (Ethiopian Institute of Agriculture Research) fills
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the gap in the supply through its regional branches, which better represent the various agro-
ecologies. The shortage of pre-basic seed has continued to pose problems in the seed industry. The
role of private seed companies is still limited to the production of hybrid maize seed, while the ESE
is the main public sector seed producer and suppliers of other crops and verities. Emergency seed
programs are usually implemented by NGOs and relief agencies.
The sole agent for seed supply in Ethiopia is the Ethiopian seed enterprise. The Ethiopian seed
enterprise collects locally or an import improved seeds from abroad and multiplies them and delivers
the product to its customers in Ethiopia. The delivery system varies according to the types of crops.
Some Crops could be stored for longer time while others are delicate and are not convenient for
storage since they can lose their viability as in the case of cotton. Such seeds are prepared by the
enterprise up on request and then delivered to the customer. As far as cotton seed is concerned
customers may obtain the seed from the enterprise for one season and then they can select from their
farm for the next season since cotton seed does not lose its vigorocity and can be recycled for three
to five years. Table 3.6, shows that in the year 2004/05, an increase in the sales of cotton seed had
been due to the new variety named “Geda” which is imported from Israel even though it was not
effective in the county. In consecutively years, shows that an ever decrease due to the farms could
reproduce cotton seed on their own farm and ESE tend to reduce to reduce its sales.
Table: - 3.6. Annual cottonseed sales by the Ethiopian seed Enterprise
Regions 2004/05 2005/06 2006/07 2007/08 2008/09
Amhara 1952 - - - 9.96
SNNP 700 - - - -
Tigray 250 - 238 - -
Others 2700 4 - - 51
Total 5671 4 238 - 60.96

Source: Ethiopian seed Enterprise
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So far there is no farm specialized in the productivity of cotton seed in Ethiopia. However, most of
the existing commercial farms and private small holders obtain their seed requirement from middle
awash cotton farms. Middle Awash enterprise also does not have special seed producing site, but
team established by technical employees of the farm, and Researchers from Ethiopian Agricultural
Research Institute, select and inspects the field for good performance with respect to vigorously,
uniformity, leaf arrangement, & color, uniformity in height. The product from selected field
harvested and ginned separately. The seed obtained from this field further processed form the seed to
clean the fiber from the seed and treated by sulpheric acid (rate of 5 liters per quintal).
Improved cotton seed produced is consumed annually due to the fact that stored seed looses its
viability as the storage period increase. Thus, the supply of seed is demand driven since seed storage
leads to less seed viability and total loss of the seed stock.
3.1.4 Constraints of cotton seed
The shortage of varieties and their limited stability is a serous technical constrains. Few cotton seed
varieties are available in Ethiopia for less favorable and drought-prone environments. Varieties
maintained by farmers lack varietals stability and hence most of the cotton varieties quickly became
susceptible to major diseases. This has disappointed the cotton farming societies who have adopted
new varieties .An additional constraint relates to cottonseed is inadequate extension and
popularization work .Variety Popularization and seed promotion by various organizations is low in
proportion to the vast number of cotton farming society in Ethiopia. Many improved varieties are not
known by farmers, and seed production in the formal sector is restricted to very few varieties.
Meanwhile, the private sector’s participation in the seed industry is negligible and is currently
limited to hybrid maize multiplication.
3.2 Pesticides and Fertilizers
3.2.1 Pesticides
Approximately 90 percent of all pesticides used worldwide are used in agriculture, food storage, or
shipping. Because of a growing world population, there is pressure to increase and preserve the food
supply by using pesticides and other agricultural chemicals.
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A pesticide is a substance or mixture of substances used to kill a pest. A pesticide may be a chemical
substance, biological agent (such as a virus or bacteria), antimicrobial, disinfectant or device used against
any pest. Pests include insects, plant pathogens, weeds, molluscs, birds, mammals, fish, nematodes
(roundworms) and microbes that compete with humans for food, destroy property, spread or are a vector
for disease or cause a nuisance. Although there are benefits to the use of pesticides, there are also
drawbacks, such as potential toxicity to humans and other animals.
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A) Sources of Pesticides
The major pesticides used in cotton farms are either domesticlly processed or imported .Most the
imported pesticides are Thiodan 25% ULV, Thioex, Talistol 20% U.L.V, marshal 25% U.L.V,
bestox 75% U.L.V and fastal 75%, Polythrin C while ethiosulfan is found at local market and
produced in Adami tulu pesticides processing company.
Table 3.7-Sources of Pesticides

Thiodan 25% ULV 
Thioex 
Talistol 20% U.L.V 
Marshal 25% U.L.V 
Bestox 75% U.L.V 
Fastal 75% 
Polythrin C 
Endosulfan  
B) Major suppliers of pesticides in Ethiopia

Most of pesticides used in cotton farms are imported from abroad and few of them are also produced
domestically. On the hand, there are cotton farms, have imported kinds of pesticides for their own
use than taking in to market.
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Table 3.9 supplies of pesticides for cotton farms
No. Suppliers Insecticides Herbicides Rodenticides Miticides
1 Filbert & Company African bollworm -
2 Chemtex private - Grass weeds

Itd.c
3 Fs Pvt.comapany African bollworm, Storage & field For plant

aphids, leaf worm & rodents growth
thirips, Whitefly & red regulation
spider mite
4 Syngenta Agro Whitefly & spider mite, Broad & Rats in large stores Red spider
services Ag. & aphids grass weeds & in the field for out mite whitefly
Ethiopia breaks
5 HEART P.L.C African bollworm & leaf - - -

hoppers
6 General & Trading African bollworm - - Red spider

pvt.co mite
7 Makoba Enterprise African bollworm - -
8 Lions International African bollworm - - -

trading (pvt) co.
9 Adami- Tulu African bollworm - - -

pesticides (Helicoverpa armigera)
processing Factory
10 Tadi Zerhin - - Field rats as a -

General Trading finished bait 40%
Plc zinc phosphide.
Sources: Animal & Plant health regulatory directorate (MoRAD)
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3.2.2 Fertilizers
Fertilizers are chemical compounds applied to promote plant and fruit growth. Fertilizers are
usually applied either through the soil (for uptake by plant roots) or, by foliar feeding (for uptake
through leaves).Fertilizers can be placed into the categories of organic fertilizers (composed of plant
or animal matter), or inorganic fertilizers (made of simple, non-carbonaceous chemicals or
minerals).
Organic fertilizers are composed of “naturally” occurring compounds such as peat manufactured
through natural processes (such as composting) or naturally occurring mineral deposits. Inorganic
fertilizers, manufactured through chemical processes (such as the Haber process) or from naturally
occurring deposits that have been chemically altered (e.g. concentrated triple super phosphate).
Properly applied, organic fertilizers can improve the health, and productivity of soil and plants as they
provide different essential nutrients intended to encourage plant growth. Organic nutrients increase the
abundance of soil organisms such as my corrhiza, which aid plants in absorbing nutrients. Chemical
fertilizers have long-term adverse impact on the organisms living in soil and a detrimental long term effect
on soil productivity of the soil.
A) Sources of fertilizers
The table 3.9 shows that the features of fertilizers have been used in cotton plantation with the state
of solid fertilizers. Currently, Dap and Urea are the two major kind of fertilizers used in most
commercial cotton farming in Ethiopia. It has also been observed during survey that there are also
cotton farming using neither organic nor inorganic fertilizers.
Table 3.9 Sources of fertilizers in cotton farms

Dap 
Urea. 
18
B) Availability of fertilizers in Ethiopia
According to the information obtained from the MoRAD shows the fertilizer Sales or consumption
figures at the national level in the years 2003-2008.It has been known that the supply of fertilizers
enough comply with the requirement of areas cultivated under different crops of the country. In the
supply of the fertilizers, there is no scheme of segregation based on the types of crops rather the
supply is calculated on the total areas that are intended to use fertilizers upon the past trend
requirement and other simple assessment. This kind of distributing the fertilizers has a lesson that the
farmers who are in need of fertilizers should be able to inform their requirement on time to the
concerned body of the government and can get what ever the amount. In other hand, there is also an
opportunity that any organized or individual farmers, who are required large amount of fertilizers, to
import themselves as per the permit stated by the MoRAD.
Table 3.10 Fertilizer Sales or consumption figures at the national level (2003-2008)
Year Dap Urea Total
2003 157955 106394 264349
2004 210838 112101 322939
2005 2248119 121735 346554
2006 251156 124561 375717
2007 259020 129121 388141
2008 265768 138988 404756

Source: Ministry of Rural and Agricultural Development, 2009
3.2.3. Marketing Arrangements for Pesticides & Fertilizers

Pesticides and fertilizers are purchased in a local market. Pesticides are purchase through bid notice
directly from suppliers. Local suppliers provide 40% down payment and 60% credit and paid when
cotton is harvested and sold. The point of owner ship is transferred at the gate of suppliers. In the
relating to the marketing activities, VAT payment and transport cost are the cost of the farm. The
19
cotton farms are free from the payment of the withholding tax. Fertilizers also purchased from
supplying public firms on cash base by presenting their requirement plan ahead.
3.2.4 Constraints of Pesticides and Fertilizers

To complicate matters, insects are quickly becoming resistant to recommended rates of pesticide
application and ever increasing amounts are needed be effective. Consumers and environmental
groups are becoming more alarmed and more vocal.
3.3. Packing Materials

Bale packaging materials are very essential in assuring the quality of cotton that would be able to
offer for sale to the cotton industry. In view of this fact there is an international acceptable
specification for cotton bale packaging materials are approved by the Joint Cotton Industry Bale
Packaging Committee (JCIBPC) for 2009-crop cotton and are intended for use as manufacturing
guidelines. These specifications are designed (1) as guidelines for manufacturing and use (2) to
improve the quality and protection of the cotton bale and (3) to improve the appearance and
marketability of the cotton bale in domestic and foreign markets. Improper or careless handling,
storage and transportation may result in damage to packaging materials.
A) Sources of Bale Packaging Materials

In the table 3.11 it is demonstrated that the major packing materials are used in the packaging of
cotton bale in the Ethiopian cotton farms. All of the listed materials could have been produced in
local manufacturers and also imported whenever a shortage is created in the local market due to
different reasons. On the other hand, there are few situations that the farmers are compulsory to
import these materials due to the domestic supply have not been satisfy the requirement of the cotton
packaging farmers in the country.
20
Table: 3.11 Sources of packing materials
Sources
Description
Domestic Import
Hessian Cloth 
Bailing Wire 
Picking sacks 
Collecting Sacks 
3.3.1 Constraints of Packing Materials

Occupationally, the shortages of packing materials have been observing in the domestic market and
farmers who are in need of the materials were required to import these materials at expensive foreign
currency. In addition to this, the farmers confirmed the imported materials have relatively less
quality than materials have been produced in the country.
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4. THE PRODUCTION PROCESS AND TECHNOLOGY SELECTION
The production process of cotton production starts from land development and ends with marketing
of raw cotton in some farm cases otherwise continuous to ginning of raw cotton and marketing of
lint in some cases. In this processes, the major operation carried out are listed here below.
 Land development
 Building and construction
 Growing of cotton
 Crop Harvesting
 Ginning (Optional)
 Marketing of raw cotton or lint cotton
4.1. Land Development

Land development includes preparation of land for cultivation, construction of farm road and
constructing of irrigation system if the farm is irrigational.
i. Land preparation for Cultivation

Cotton plantation requires removing of any trees and bushes from farm lands in order to avoid any
competition for soil nutrients, sunlight and water, and attraction of pests that harm cotton. This
operation is advised to be care out in spring and it can be carried out using slashing machine or labor
force based on cost and time advantages. Slashing machine usage for this operation will have
advantage on labor force with respect to time and cost, but it may cause removal of top fertile soil
with trashes and redundant usage may cause hard layer formation in subsoil because of compaction.
This hard layer formation may cause drainage problem and expose the land for salinity problem.
ii. Construction of Farm road

Construction of farm road in cotton farms is important to transport input, labor and output smoothly.
The farm road constructed within the farm can have 7m width in order to face beg machineries. The
length of the road to be constructed can be determined based on the block parameter.
iii. Cotton Irrigation Systems

There are several methods of applying the water. The most common once in irrigation of cotton
plantations are surface irrigation, sprinklers system and drip line irrigation.
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B. Surface Irrigation
One of the first irrigation systems were simply siphon tubes that were placed in a ditch and use to
run water between the rows of the crop (See Figure 4.1), or diverting water to "flood" a basin all at
one time. These approaches are referred to as "surface" irrigation systems because the water travels
along the surface of the field. If the field is well-designed with the right slope, and the system is
properly operated, surface irrigation can be an efficient method of delivering water to crop.
However, those conditions are not always met and surface systems are often very labor-intensive. In
this system diversion wear is first constructed at upper course of the river to divert the water to
primary cannel. Primary cannel is the ditch which can be concert or earthen and brings water from
main source to the farm site. The size and the length of this cannel determined based on the water
amount required to discharge to the farm and the distance between the farm and water source
respectively. Following the primary cannel, secondary cannels are constructed with in the farm in the
manner to supply different blocks of the farm. Finally, tertiary cannels constructed with in the block
mainly to supply water in to the furrows through siphon tubes. To proper management of water, spill
ways and get bulbs are constructed at different points.
Surface irrigation is the only system used in Ethiopia cotton farms so far. Note that around Awash
River the irrigation structures up to primary cannels are constructed and maintained by government
since government is providing irrigation water to the farms by charging Birr 3 per 1000 m3 of water.
Figure 4.1: Siphon tubes used to deliver water between the rows of a cotton crop
C. Sprinklers Irrigation System

In most cases the sprinkler irrigation systems used in cotton are mounted on a "center pivot" (Figure
4.2). The earliest versions of the center pivot had sprinklers mounted on top of the pipe carrying the
water; but in arid areas, this could lead to a great deal of water loss due to evaporation. Therefore,
most cotton producers in arid areas use sprinklers placed just above the plant or are implementing
"Low Energy Precision Application" (LEPA) systems on their pivots.
23
The transition from surface to sprinkler systems is evidenced by information in Figure 4.2, which
illustrates the percentages of irrigated cotton acres by surface and sprinkler systems.
Figure 4.2: "Standard" center pivot irrigated system
These sprinklers are replaced with drop lines that "lay" the water down between crop rows as
illustrated in Figure 4.3. Center pivots have been modified with on/off options, so that only those
sections that require irrigation receive supplemental water. These sections include areas with better
soil types, or that are located at a lower part of the field where it receives water runoff from higher
areas.
Figure 4.3: Drop lines of a LEPA irrigation system in cotton.
D. Drip Irrigation
Another trend in cotton irrigation systems, particularly the place where water resources are
becoming limited, is a move to subsurface drip irrigation systems. This type of system is expensive
to install and maintain, as it involves running a series of tubes about 14 inches below the surface of
the entire field (See Figure 4.4). However, they are a very efficient way to deliver water directly to
the root zone of the plant.
24
Tubes are spaced either under each row, or between every other row depending on the soil type and
environment. Drip irrigation saves 60% of irrigation and makes weed management less through
making the surface dry, but its initial cost is high.
Figure 5: Drip line
Not that the cost required to construct in all irrigation system case varies with the land feature,
therefore, detailed plan of these structures should be presented for the Bank and has to be evaluated.
4.2. Building and Construction

Building and construction can be executed along land development work. Construction works that
are important for cotton farms are workers residence, office, workshop, machine shed, warehouse,
generator house and separate stores foe fertilizer, chemical and spare part. The size and quality of
these constructions can vary with the financial position of the farm.
4.3. Growing of Cotton

A. Land Cultivation
Before cultivation plant remnants should be removed from farm lands in order to avoid recycling of
pests and diseases that harm cotton. Repeated plowing is necessary to obtain a good pulverized
surface. Plowing the land for two or three times across the field will produce a fairly good tilled
land. After getting required plow, the land is laid out into ridges and furrows with the help of a ridge
plough. Ridging of land and sowing cotton on ridges economize the use of irrigation water and the
furrows acts drainage channels whenever heavy rains are received particularly in heavy clays.
25
Ridging is very useful for sowing of seed by dibbling and later irrigation and also facilitates for
better drainage. Length of ridge/furrow depends on slope of land. If the slope is < 1 % the ridge
length may be 30 - 40 meters. Provide proper water ways (particularly in heavy soils) along the slope
of the land for draining excess water under heavy rainfall situations, because cotton is highly
sensitive to poor drainage.
Deep cultivation in hot dry tracts encourages loss of moisture as well as organic matter from soil.
More frequent tillage than is really necessary is also said to produce the same adverse effects.
Hybrids or high yielding varieties of cotton are deep rooted and hence deep plowings (above 25 - 35
cm) are necessary by using mould board plough or tractor drawn disc ploughs. Use of sub-soiler may
be helpful in heavy black soils once in 2 - 3 years where soil pans (hard layer) are usually formed
because of compaction.
The tillage implements used for growing the cotton crop vary with the nature of the soil, the method
of growing the crop and the different operations of cultivation. Generally, implements used in
common in land cultivation are:
o Disc plough or mould board,
o Bakhar or blade harrow,
o Beam leveler or clod crusher, single or multi-coultered wooden seed drills,
o Slasher or Rotavator
o Pegged or spike toothed harrows
B. Plantation of Cotton
Seed Rate and Spacing
The optimum number of plants per unit area, and the distance between and within the rows depend
on the inherent vegetative habit of a variety and conditions of soil fertility, soil moisture and cultural
practices. According to Ethiopian Agricultural Research Institution (EARI), a seed rate of 15-25
kg/ha and 30-45kg/ha is used for acid socked seed and non acid socked respectively. Spacing
between plants can be 20 cm and 90 cm between the rows or 25cm between plants and 85cm
between rows, see figure 4.5.
26
Seeding methodology used in commercial farm is row planting and the cotton seed is placed at the
depth of 3-5cm according to the soil type, but seeds sown to greater depths may fail to emerge. The
seed must be placed more shallowly in dusty, cool areas of the Cotton Belt, and more deeply in
warmer areas. Cottonseed can be mechanically planted using planting machines known as planter.
The planter opens a small furrow in each row, drops a seed, covers them, and then packs more dirt
on top.
Figure 4.5: Plant spacing on ridge
80cmX25cm
Optimum sowing time

Sowing period varies from region to region. Irrigational farms around Upper and Middle Awash
River have sowing between the month of April and May and the Lower Awash areas sows from May
to June. The detail is given in table 4.1. Delayed sowing will results in delayed flowering and this
reduced flower and boll number, and fiber characteristics also slightly affected.
Sowing Techniques
Crop is usually sown in lines with the help of bullock drawn seed drill to facilitate periodical
harrowing. In case of hybrids/high yielding varieties/cotton grown in heavy soils it is preferred to
sow the seed by dibbling. Under conditions of intensive cultivation, the dibbling of seed produces
very good results by securing a uniform stand of properly spaced plants.
There are two ways of seeding, namely wet seeding and dry seeding. Dry seeding is done on dry
ridges and soaked later by allowing irrigation water in furrows. Wet seeding is a sowing of the
cotton after socking of the land through irrigation. Wet seeding helps to reduce weeds infestation by
making them grow using irrigation water and plowing again the field to expose the weeds to sun
before cotton sowing.
27
Gap Filling
During sowing few plants can fail to grow because of so many reasons. Whatever the cause is, it
reduces plant population per hector. This situation may create for the remaining plants a chance for
better growth, particularly if the variety cultivated has a good branching habit. The smaller gaps are
covered up by more vigorous growth of plants and the crop yield does not suffer. In some cases, it
may not benefit. Observations showed re-sowing of gaps aggregating up to 20 percent of the stand
did not increase the yield. Patches of this degree can be safely ignored; particularly if the variety is a
mono-podia type and the optimum sowing period is almost passed. Re-sowing rather late, say 4 - 5
weeks after the original seedling, have no much benefit, because the plants from such late sowings
do not make good growth and seldom produce a normal crop. Plants re-sowed, therefore,
recommendable if the gap is above 20% and it should be done up to 10 -15 days after the first.
C. Plant Maintenance
Plant maintenance starts immediately with the germination of the crop and includes thinning of
plant, cultivating, pest controlling, fertilizing and watering.
a. Thinning
Thinning is important to optimize plant density and increase crop performance; therefore, excess
plants should be thinned as soon as the plants are about 10 - 15 cm height and have two pairs of 'true'
leaves. Earlier thinning is not desirable, the danger or seedling loss due to unforeseen damage to
seedlings. Delayed thinning is also having undesirable effects like disturbing the adjacent plants due
to excessive root development by the time of thinning.
In dense - population, vegetative growth is curtailed and very few or no vegetative branches are
formed. The number of bolls per plant is the only character affected by plant densities; the number of
seeds per boll, the total weight of the individual seeds and the amount of fiber per seed are almost
unaffected. Therefore, plant density affects yield mainly by determining the number of bolls per unit
area. Excess plant density also can delay maturity, probably because conditions for boll maturation
become less favorable and it lead to lodging some times. In contrary, a dense stand may have
advantage in reducing the evaporation from soil and competes effectively with weeds. Dense stand
may avoid crusting of soil - more rapid and uniform development of plants.
28
In order to ensure the required plant density, in some places sowing more seeds than are required for
producing the desired number of plants, when the plants have reached a stage of development, the
plants are thinned to the desired stand. Plant density or otherwise spacing adopted between and
within the rows is mainly depends on the species chosen and the plant type of the variety. The
recommendable plant density in Ethiopia case is 50,000 to 55,000 per hectare according to the
information obtained from EARI.
b. Fertilizers Application
Fertilizer application differs from area to area depending upon available nutrients in the soil. In
general, for dry land cotton crop, 20 kg of Nitrogen, 18 kg of Phosphorus and 78 kg Potash is
economical. Nitrogen is applied in split doses, half dose at the time of sowing and other half as top
dressing during thinning or just before flowering. For irrigated cotton this dose can be doubled. In
Ethiopia, most cotton farms have not yet started using fertilizers except in some farms where Urea is
being used.
If nitrogen application is found important, it can be done after 30, 60 and 90 days of sowing in equal
splits (irrigated cotton), Phosphorus at last plowing and Potash after 30, 60 days of sowing in equal
splits. Placement / pocketing of fertilizer will be done at 7 - 10cm away from plant and at 7 - 10cm
depth of the soil. Sufficient soil moisture should be there at the time of top dressing of nitrogen
fertilizer.
c. Watering of the Crop

The irrigated cotton crop is mostly sown three to four weeks after a preliminary heavy irrigation and
second light irrigation is given. Subsequent watering depends upon the nature of the soil and the
weather conditions. A planned moisture regime that will restrain vegetative growth without
adversely affecting yield is essential. During early part of the season, less water is used by the plant
and more water is lost by evaporation than transpiration. The use of water increases from about 3
mm reaching a peak of 10 mm a day when flowering is at its height. The peak is reached when the
plant is loaded with bolls and water consumption then begins to decline.
29
Water Requirement
Moisture stress during flower and boll periods results in flower drop, boll shedding, poor
development of bolls, low ginning percentage and ultimately low yield of fiber. Irrigation is
continued until the first boll of last flushes opens. Otherwise the quality of lint is poor in black
clayey soils. In light soils, one or two irrigation's may be necessary after the first boll of last flush
opens. Flowering and ball formations are the critical stages with regard to irrigation. Generally
cotton crop needs 700 - 1000 mm of water during its lifetime. The requirement at different stage is
given here below.
1. Up to flowering (20% of total water requirement)
2. Flowering (40% of total water requirement)
3. Flowering - Boll bursting (30% of total water requirement)
4. Boll bursting - maturity (10% of total water requirement)
Scheduling of irrigation
Irrigation to cotton may be scheduled by soil moisture depletion approach as well as climatological
approach using modern technology or simple observation on field. In case of soil moisture depletion
approach, optimum irrigation schedule is at 50% depletion of available soil moisture. Under water
shortage conditions, irrigation can be scheduled even at 75% depletion of available soil moisture.
According to EARI, cotton should be irrigated 75mm every 2 week for 126 weeks or 125 mm every
3 weeks for 126 weeks.
i. Observation Method of Water Scheduling

Careful observation shows a change in the appearance of the cotton plant before signs of wilting
occur. The foliage has a slightly bluish tinge and in drier spots of the field the plant will appear
somewhat darker. These drier parts in the field should be watched closely, for they are the first to
change in color and serve as a guide for scheduling irrigation. Water has to be applied when leaves
wilt on the upper third of the plant.
30
ii. Modern Water Management Practices
Since water is a limited resource, and due to economic constraints (costs of water, pumping and
labor needed to apply irrigation), producers are very prudent in managing this resource. A number of
approaches are used to decide when to irrigate, including:
 Computer models that predict water use based on the growth stage of the plant and weather data
(Figure 4.6);
 Soil moisture probes that determine if there is sufficient water present to meet crop needs
(Figure 4.7);
Figure 4.6: Typical weather station Figure 2. Transmitter of a soil moisture sensor
Problems Due to Excess Moisture

 Excess moisture at later stages delayed opening of bolls.
 Bolls are susceptible to boll rot pathogens.
 Lodging of plants.
d. Weed management
Weed infestation in cotton plantation is high because of the following reason.
o Cotton grown under both rain fed and irrigated conditions, conducive for heavy weed infestation.
o Higher level of fertilization application for Hybrids creates favorable condition for weed growth
o Wider spacing and slow growth in early stages helps weeds to make maximum cover due to its
quick growth (weeds takes about 8 weeks to reach, while cotton takes at least 16 weeks to cover
90% space).
31
Methods of Weed Control
i. Cultural Methods
 Timely sowing of cotton gives vigorous crop growth quick canopy coverage - suppress weeds.
 Band or pocket application of N-fertilizer to cotton reduces the nutrient availability for weed
growth.
 Adopt furrow method of irrigation. Raising cotton in paired rows and utilizing the inter-space
effectively by cultivating intercrops like onion, greengram, bhendi etc., is found useful not only
to reduce the incidence of weeds but also to obtain additional income per unit area.
 Mulching not only reduces weeds but also evaporation from soil.
ii. Mechanical Control

 Deep plowings, digging and removal of rhizomes or stolen or perennial weeds before sowing.
 Periodical harrowing reduces weeds and evaporation losses of moisture.
iii. Chemical Control

Pre-planting
 Soil incorporation of Fluchloralin (Basalin) at 2.0 lit/ha as pre-sowing application up to 5cm
deep is very useful to control mostly annual grasses and some broad leaved weed.
 Pre sowing application of Nitraline, Trifluralin, and Dinitramine at 1.0 kg/ha each. Alachlor 5.0
kg/ha or Diuron 1.5 kg/ha is very effective.
 For controlling Cyanodon, TCA at 5kg/ha as preplanting treatment is best.
Pre - emergence
 Pre emergence application of Fluomaturon 3.0 kg/ha or diuron 1.2 kg/ha is most effective
 MSMA and DEMA at 2.0 kg/ha as post emergence application can control both annual and
perennial weeds.
 However, TCA and Dalapon at 1% are well known herbicides to control perennial weeds like
Cyanodon and sorghum Halopense (Johnson grass)
32
Post-emergence
 Trifluralin 0.75 kg/ha and Nitralin 3kg/ha can control most grasses and sorghum halopense.
 Nitrofen 1.5 kg/ha as pre-emergence followed by MSMA at 5 lt/ha post-emergence can give
good weed control. Monuron at 1.5 kg/ha may be used on excessively heavy soil.
 Chloropropham at 6 kg/ha can safely be used in both heavy and light soils as pre-emergence.
e. Diseases and pests

Cotton plant is prone to different pests. As it has been shown in other crop farms, there are also
different pests which are prevailing in cotton plantation. However, each pest has their own
corresponding controlling mechanisms which are commonly called pesticides. Theses pesticides
have their own environmental impact on plantation area as well as on the workers specially who are
involved in spraying of chemicals. There are also regulations and laws which have to be respected to
be engaged in the cultivation of the cotton farms.
4.4. Harvesting
While harvesting is one of the final steps in the production of cotton crops, it is one of the most
important. The crop must be harvested before weather can damage or completely ruin its quality and
reduce yield. The season of harvesting varies with of sowing, and duration of variety. The season for
harvesting in Ethiopia is given in the table here below.
Table 4.1: Planting & harvesting Calendar

Description Planting No of Harvesting No of
weeks weeks
Lower Awash June(3rd wk )-Aug.(2nd wk) 8 Nov.-Jan.(2nd wk) 10
Middle Awash Apr.(4th wk)-Jun.(1st wk) 6 Sep.(3rd wk)-Nov. 10
Upper Awash Apr.-May(1st wk) 5 Aug.(4th wk)-Nov.(1st wk) 10
Rift Vally May-Jun.(1st wk) 5 Sep.(2nd wk)-Nov.(3rd) 10
Hummera & Mettema Jul.-Aug.(2nd wk)) 6 Nov.(3rd wk)-Jan. 10
Gambella Jun (3rd wk)-Jul. 6 Dec.-Jan 8
Average 6 10
33
In most of the Cotton Belt states, spindle harvesters are used. They pull the cotton from the open
bolls using revolving, barbed spindles that entwine the fiber and brightness of the fibers is also
graded. Cotton that is very white generally is of higher value than cottons whose color may have
yellowed with exposure to elements before harvesting. Cotton, being a biological product, typically
contains particles of cotton leaves called trash. The amount of trash influences the cotton’s value
since the textile mill must remove trash before processing.
4.5. Raw Cotton Storage

Once harvested, seed cotton must be removed from the harvester and stored before it is delivered to
the gin. Seed cotton is removed from the harvester and placed in modules, relatively compact units.
A cotton module, shaped like a giant bread loaf, usually contains about fifteen bales. In the field,
before ginning a bale weighs about 1,200 pounds.
4.6. Ginning
From the field, raw cotton moves to nearby gins for separation of lint and seed. The cotton first goes
through dryers to reduce moisture content, and then through cleaning equipment to remove foreign
matter. The cotton is air conveyed to gin stands, where revolving circular saws pull the lint through
closely spaced ribs that prevent the seed from passing through. The lint is removed from the saw
teeth by air blasts or rotating brushes, and then is compressed into bales weighing approximately 500
pounds. Baled cotton is moved to a warehouse for storage until it is shipped to a textile mill for use.
A typical gin will process about 35-40 bales per hour, while some of today’s more modern gins may
process as many as 60 bales an hour.
4.7. Classing
Different cotton varieties yield different attributes. After the lint is baled at the gin, samples taken
from each bale are classed according to fiber strength, length, uniformity, color, non-fiber content
and fineness using high volume instrumentation (HVI) and the aid of an expert called a Classer.
Scientific quality control checks are made periodically to ensure that instrument and Classer
accuracy is maintained. The fiber’s fineness is a factor for determining the type of yarns that can be
made from the fiber—the finer the cotton fibers, the finer the yarns. Color or which are known as
linters.
34
The linters go through additional processing steps before being made into a wide variety of products
ranging from mattress stuffing to photographic film. After the linters are removed, the seeds are put
through a machine that employs a series of knives to loosen the hulls from the kernel. The seeds are
then passed through shakers and beaters. The separated hulls are marketed for livestock feed or
industrial products.
4.8. Cottonseed
Cotton actually is two crops, fiber and seed. About one-third of the cottonseed produced from a
typical crop is crushed for oil and meal used in food products and in livestock and poultry feed. For
each 100 pounds of fiber produced by the cotton plant, it also produces about 162 pounds of cotton-
seed. Approximately 5 percent of the total seed crop is reserved for planting; the remainder is used
for feed, or as whole seeds or raw material for the cottonseed processing industry. After being
separated from the lint at the gin, the cotton’s seed are transported to a cottonseed crushing mill.
35
5. MARKETING STUDY OF RAW COTTON
5.1. General
Since the World War II the production and consumption of cotton has increased at an average annual
growth rate of about 2% .Growth in the demand for cotton was comparatively higher in the 1950s
and 1980s, with an average growth rate of 4.6% a year during the 1950s and 3% in the 1980s.
Developing countries have absorbed much of global cotton output since the end of World War II.
Their share in global consumption has become even more significant since the beginning of 2000s.
Developing countries accounted for approximately 78% of global cotton consumption between
1981and 1999; since 2000 their ratio has been above 80%; According to projections based on ICAC
(international cotton advisory committee) figures, in 2010 they would absorb almost 94% of global
cotton output.
Cotton production and consumption has shifted to developing countries mainly as a reflection of
rising wage levels and price increment in developed countries. This means that raising labor costs
eroded the competitive edge of developed countries, and contributed to the shifting of cotton
producing and processing to low-cost economies (most notably Asia and Africa).Cotton is the
foundation stone for most developing countries. The main cotton producing economies also account
for a large part of consumption. According to ICAC data, China, the United States, India, and
Pakistan as a whole have accounted for approximately more than 55% of global cotton consumption
over the period 1980 to 2008. Their overall consumption has risen considerably in volume.
Cotton is the world's most popular fiber, accounting for over 40% of the world fiber demand. Textile
processors and consumers alike appreciate cotton's versatility in a wide variety of textile and
clothing products. In addition, changing consumer lifestyles and perceptions are tending to favor
cotton. Wearing cotton is associated with comfort in the eyes of critical consumers and cotton goes
hand in hand with a growing awareness of environment and a desire for "healthy living" and
"naturalness which forecasts the bright future of cotton.
36
The weakening global economic situation is reducing world raw cotton consumption as consumer
demand fades and surplus raw cotton inventory weigh in the stock. This weakening demand has
depressed prices. In response to this some counties have taken to support domestic prices in order to
maintain farms income which has raised state stock reserves. Generally, cotton consumption is
expected to be demanded throughout the world as the effect of these factors.
5.2. Market Segmentation for Cotton.

The major end uses for cotton fiber include wearing apparel, home furnishings, and other industrial
uses (such as medical supplies). The cotton fiber is made primarily into yarns and threads for use in
the textile and apparel sectors (wearing apparel would account for approximately 60% of cotton
consumption). Cotton is also used to make home furnishings, such as draperies (eventually the third
major end use) or professional garments (about 5% of cotton fiber demand).
Besides traditional uses cotton is made into specialty materials suitable for a great variety of uses.
Cotton fabrics with specialty applications include, for example, fire-proof (flame resistant) apparel,
which is suitable for professional uses and provides effective protection against potential risks
associated with high temperature and particularly flashover. Flame resistant cotton fabrics are treated
with chemicals. Without chemical treatment, cotton would burn up releasing very strong heat, just
like the major part of synthetic fibers, which melt when they are exposed to high temperatures.
Cotton also finds specialty applications in medical and hygienic uses. Most notably, the fiber is used
to manufacture hydrophilic cotton (cotton wool), compress, gauze bandages, tampons or sanitary
towels, and cotton swabs. In this field, the most suitable cotton variety is the species Gossypium
herbaceum with short-staple thick fibers.
One development that will most likely affect cotton consumption patterns is the marketing of colored
fibers tailored to the needs of the textile industry. Substantial technological advances have taken
place in this area. In China for example, one does not make any more dyeing. China uses transgenic
cotton plants which produce yellow, white, green, or red cotton; to sum up, any customized color
grade...”
37
5.3. World cotton Consumption
World wide cotton consumption decreased as production decreased. And production decreased much
higher than consumption. China became the most important country in cotton consumption in the
last ten years. Where as in other countries as the USA local consumption of cotton and its products
decreased due to relative undervaluing of Chinese currency versus the US Dollar. It is clear that this enabled
the Chinese to literally swamp export markets and this can be noted in the expansion of their textile sector. In
Contrary to Chinese performance the consumption in Eastern Asian countries decreased due to the long term
effects of the Asian currency crisis of 2000 in Korea, Thailand and Malaysia. The following table shows the
consumption trend for the last five years in major consumer countries.
Table.5.1. Top ten cotton consumer countries (metric tone lint cotton)
Description 2004/05 2005/06 2006/07 2007/08 2008/09
China 8382 9798 10886 11213 10124
India 3222 3636 3941 3984 3701
Pakistan 2286 2504 2722 2722 2504
Turkey 1546 1502 1589 1306 1023
Brazil 938 969 996 1002 936
US 1457 1278 1074 998 816
Bangladesh 408 479 540 599 599
Indonesia 468 474 474 484 435
Mexico 457 457 457 435 392
Thailand 457 446 425 425 408
Others 4035 3785 3771 3545 3252
Total 23658 25328 26875 26713 24192
change - 1670 1547 -162 -2521
percentage - 7.1 6.1 -0.6 -9.4
Average 0.8
Source: USDA
38
China is by far the major consumer of cotton in the world up to 2007/08. The year to year world
cotton consumption also shows an increasing trend for the years 2005/06 and 2006/07 and then
declines in 2007/08 & 2008/09 using geometric average. The decrease observed in consumption
could be attributed to the reduction of purchasing power due to world financial and economic crises.
The decrease on consumption is more than the decrease observed on production.
5. 4. World Production
World cotton production declined in both 2007/08 (by 2%) and 2008. These two consecutive
declines were caused principally by decreases in cotton area, as cotton prices have become less
attractive relative to competing crop prices and increased production costs of cotton. World cotton
area decreased by 5% in 2007/08 and 6% in 2008/09. The world yield climbed to a record of 795
kg/ha in 2007/08, but was 763 kg/ha in 2008/09 due mainly to unfavorable weather. In 2007/08,
production declined significantly in the United States, Pakistan, Turkey, Burkina Faso and Australia,
but reached new records in China (P.R.), India and Brazil. In 2008/09, the decline in world
production was driven by a fall of more than 1.3 million tons in the United States. Production was
also estimated lower in China (P.R.), India, Uzbekistan, Brazil, and Turkey, but slightly larger in
Pakistan. U.S. production has declined for three consecutive seasons and fell to 2.8 million tons in
2008/09, down by nearly half from its record in 2005/06.
In 2009/10, world cotton production is expected to remain stable at 23.6 million tons. Decreasing
cotton returns, more attractive prices for competing crops, and expected difficulties in financing
inputs are encouraging farmers to plant less cotton. World cotton area is forecast down by 3% in
2009/10. The average yield is projected at 781 kg/ha, slightly higher than in 2008/09, assuming more
favorable weather.
Production in Turkey has declined each season since 2004/05 and fell to 450,000 tons in 2008/09, or
just half its level of 2004/05. In 2009/10, production is expected to decline in China (P.R.) and
Turkey, but to increase in India and the United States. World ending stocks declined slightly in
2007/08, to 12.5 million tons, but they are projected to reach 13.3 million tons by the end of
2008/09, or 58% of 2008/09 world mill use.
39
World stocks will remain high relative to demand in 2009/10. Many countries have seen their cotton
stocks increase in 2008/09, which will provide significant supplies in 2009/10. World cotton imports
are forecast to rebound by 11% in 2009/10 to 6.7 million tons, helped by the expected small
recovery in mill use in China (P.R.). Chinese imports are expected to increase by 17% to 1.7 million
tons. Imports by Turkey and Pakistan are also expected to increase. Exports by the United States are
expected to continue to decline to 2.4 million tons (-9%), whereas exports by India are projected to
more than double to 1.2 million tons.
Given this situation, producers in developing and transition countries would be best advised to
concentrate on increasing the efficiency of their growing operations, maximizing their yields on
reduced hectarage, improving the quality of their baled cotton and methods of marketing, as opposed
to increasing the size of their cotton planting. In fact, the best way to hedge their price risk in the
face of potentially volatile markets would be to reduce area (while increasing yield) and diversify
into other non-related. Furthermore, the producers have to have the following complimentary assistance.
 An efficient credit system allowing small farmers to acquire quality inputs in a timely manner is
a prerequisite for developing the cotton sector and reducing poverty; for this purpose, a direct
link between the payment of seed cotton and the recovery of input credits has to be guaranteed.
 Performances can be improved by giving more power to cotton growers in the management of
the sector and encouraging a greater participation of the private sector.
 Research and extension services cannot be left under the sole responsibility of the public sector.
 Seed cotton marketing activities are best performed in a regulated framework agreed upon by the
inter-profession.
40
Table: - 5.2. Major Cotton producer countries (metric tone lint cotton)
Description 2004/05 2005/06 2006/07 2007/08
China 6579 6183 7729 8056
India 4137 4148 4746 5356
USA 5062 5201 4700 4182
Pakistan 2425 2213 2155 1938
Brazil 1285 1023 1524 1602
Uzbekistan 1132 1208 1165 1208
Turkey 904 773 827 675
Others 4898 4632 3713 3241
Total 26440 25382 26560 26258
change - -1058 1178 -302
percentage -4.0% 4.6% -1.1%
Average -0.67 %
Source: USDA.
As depicted on the table 5.2.above, China is the major producer of cotton worldwide and followed
by India and USA respectively. Subsequently there are other countries in the world that produce
cotton. The year to year total volume of production trend is tending to increase and showing a slight
decline in 2007/08.
5.5. World Cotton Trade

Raw cotton neither imported nor exported, but it is within the world trade after being ginned and
produced in the form of lint cotton. The import and export performance in the form of lint cotton is
within the world cotton trade as shown in the following descriptions since cotton export can not be
thought without cotton production.
5.5.1. World Cotton Import

Cotton is not imported in its raw state, but traded after being produced in the form of lint, where its
performance is as shown below in metric tones per year.
41
Table: - 5.3. Top ten cotton importer countries (metric tone lint cotton)
Description 2004/05 2005/06 2006/07 2007/08
China 1390 4199 2305 2510
Bangladesh 403 482 540 610
Pakistan 382 352 502 851
Turkey 743 762 877 712
Indonesia 479 479 479 501
Thailand 497 412 415 420
Mexico 394 380 295 333
Vietnam 148 153 196 207
Russia 316 310 305 261
Korea 292 220 233 212
Others 2238 1937 1999 1665
Total 7283 9685 8144 8281
Change - 2402 -1541 137
Percentage - 33.0 -15.9 1.7
Average 6.3%
Source: USDA
From table 5.3 above china is the most consumer of cotton in all the years under consideration and
followed at distance by Bangladesh and Turkey. Cotton import follows an increasing trend in the
years 2004/05 and 2005/06 and declined in the year 2006/07 as the effect of decrease observed in
area of cotton cultivation and recovers in the year 2007/08 due to good weather condition.
5.5.2. World Cotton Export

Raw cotton is not exported in its raw state, but traded after being produced in the form of lint; the
export situation for four years is as shown below.
42
Table: - 5.4. World Cotton Export (metric tone lint cotton)
Description 2004/05 2005/06 2006/07 2007/08
USA 3143 3821 2833 2973
Uzbekistan 860 1045 980 958
Brazil 339 429 283 486
India 144 751 994 1531
Australia 435 628 464 265
Burkina 212 305 294 169
Greece 255 294 272 229
Turkistan 82 120 152 174
Benin 136 103 109 109
Kazakhstan 136 192 189 115
Others 1882 2019 1587 1358
Total 7623 9707 8077 8366
Change - 27.3 -16.8 3.6
Total change 14.1
Average 4.7%
Source: USDA
The leading exporter of cotton is the USA followed by Uzbekistan. Cotton export followed
increasing trend up to 2006/07. But the rate at which import increased is higher than the rate at
which export increased which gave a chance for relative better opportunity for cotton price stability
despite existence of economic crises and decreased land under cultivation.
5.6. Regional Cotton Production Perspective

Many countries of Sub-Saharan-Africa (SSA) have a strong comparative advantage in cotton
production. The share of SSA in world cotton production increased from 3% to 5% during the last
decade. During the same period, its share in world exports of cotton lint rose to 15% in 2001/02 and
the potential for further growth is substantial, particularly in West and Central Africa. Reforms have
been undertaken in several SSA countries to improve the competitive position of the cotton sectors
and strengthen private sector involvement.
43
The economics of world cotton production and trade have been in recent years strongly distorted by
the heavy subsidies paid by some countries like (USA and EU) to their cotton farmers. These
subsidies have pernicious economic effects, since they promote production in countries with high
production costs at the expense of countries with lower production costs and, in particular, at the
expense of African countries. The negative impact of these subsidies in the fight against poverty is
quite dramatic. By increasing artificially production and exports and depressing world prices, the
subsidies reduce the export earnings of African countries, thus curtailing the revenues of several
millions of Africans living under one dollar a day.
Table: - 5.5. Regional cotton production: - the regional lint yield/ha of cotton is as shown below
Country Area Yield
(Million hectares) (Kg/hectare)
2006/07 2007/08 2006/07 2007/08
Burkina 0.70 0.40 404.00 367.00
Mali 0.46 0.28 375.00 345.00
Cote d’Ivoire 0.21 0.20 317.00 245.00
Cameron 0.20 0.14 397.00 327.00
Benin 0.23 0.23 448.00 465.00
Chad 0.25 0.18 174.00 230.00
Togo 0.07 0.07 268.00 368.00
Senegal 0.04 0.04 495.00 435.00
Egypt 0.25 0.24 863.00 907.00
Zimbabwe 0.35 0.38 311.00 272.00
Nigeria 0.38 0.40 229.00 248.00
Source: Foreign Agricultural Service/USDA Office of Global Analysis
From table 5.5 above Burkina Faso, Benin, Zimbabwe, and Mali are the dominant producers of
cotton in the region. Though, Ethiopia has better yield per hectare, the total land under cultivation
demands for further management to utilize the conducive natural and policy environment.
5.7. Regional Raw Cotton Import /Export

There was no regional import/export of raw cotton as it is within Ethiopia.
44
5.8. Demand and Supply of Raw Cotton in Ethiopia
A. Demand for Raw Cotton
The demand for raw cotton primarily comes from ginneries as well as hand loom industries which
start their production process using raw cotton, as a raw material since it is the input in the
production of lint cotton to be used for fabrics production. Generally, the demand for cotton is
expected to continue as the effect of the following
a) That the world’s population will continue to increase;
b) Similarly, Consumption of cotton is likely to increase over time;
c) Demand on agricultural land for the production of foodstuffs will increase; i.e. to say the land
which was used for cotton production may shift to other competing crops there by decreasing
yield, which could be a source of demand.
d) Farm subsidy systems practiced by Europe and the USA (amongst others) will be reduced.
e) Additional Spinning factories are under way to demand lint cotton.
Cotton and its products are widely used raw materials in textile factories throughout the world to
produce fabrics of cotton fiber or blend with other man made fibers and yarns to produce a fabrics.
Currently, there is a tendency of demand shift of spinning factories from artificial fibers
consumption to lint cotton consumption and demand for establishment of new spinning factories
which will demand raw cotton. Ethiopian lint cotton which is the product of raw cotton has
significant demand in international market and hence it has large export demand though insignificant
amount of lint cotton is also consumed by other sectors like health centers. Though the demand trend
for cotton is as stated above, it is affected by a number of factors, the main once being economic
growth, exchange rate fluctuation, prices of competing products (e.g. Man made fibers) and social
arrest in production areas.
1. Demand from Ginning Factories

The raw cottons that are produced in various farms take their own path to ginneries. Ginneries in
Ethiopia can be modern factories or traditional handloom cottages. Ginning is the process of
separating lint from seed. Ginning process is mostly performed by mechanical means. Although
there are two systems of ginning in the world (roller ginning and saw ginning), the saw ginning is
the one mostly used in Ethiopia.
45
Although there are some ginneries away from cotton farms, most ginneries in Ethiopian are state and
private owned firms which are located close to the cotton farms. The necessary raw material for
ginneries is the raw cotton. Obviously, the sources of supply of raw cotton for the ginneries are the
local commercial cotton farms. Some of the private owned ginneries have their own cotton farm;
others use both the state owned and private cotton farms as their raw material sources. The ginneries
supply the lint cotton they produce for local consumption and for export.
Similar, to other crops, cotton has also seasonal nature of production. Because of seasonality of
cotton production, ginneries in Ethiopia work on average 5-8 months per year and the rest of the
months in the year go to maintenance and servicing the machineries. During the times of operation,
the ginneries work up to 24 hours a day with 3 shifts at peak seasons and the workload become
lesser and lesser gradually at the end of the season. It is also found out that a typical ginnery will
process about 12 bales of raw cotton per hour, while some of today’s ginneries that are more modern
may process as many as 60 bales per hour. Currently, there are 11 ginneries in the country with an
average processing capacity of 230,455 Quintals of lint cotton per annum. Out of these ginneries 4
are state owned and three of them are rented for private investors and located in cotton producing
farms of Tendaho, Middle Awash, South Omo and Gambela (Abobo). The remaining ginneries are
privately owned and located at Addis Ababa (4), Gondar (2) and Humera (1).
Table: - 5.6. Location of ginneries and processing capacity of lint cotton

Processing Capacity Planned
Ginneries Location of ginnery Ownership
(MT/day) (Mt/year) ginneries
Tendaho 300 58,500 Dubti Rented -
Awash/Werer 200 39,000 Werer Rented 1
Arbamich Ginnery 80 15,600 Arba-Minch Rented -
Gambella/ Abobo 60 11,700 Gambella Public 1
Edget 50 9,750 Addis Ababa Private -
Shewa Ginnery PlC 15 2,925 Addis Ababa Private -
Gondor Ginnery PLC 30 5,850 Gonder Private -
Hiwot Farm PLC 300 58,500 Dansha Private -
Des 90 17,550 Gonder Private -
Turu Trading PLC 75 14,625 Addis Ababa Private -
Birale 100 19,500 Addis Ababa private 1
Total 253,500 - - 3
Average 23,046 - - -
Source: Privatization and Public Enterprises Authority.
46
As it is shown on table 5.6 above the demand from local ginning factories is estimated to be
equivalent conversion of 253,500,000 kg of lint cotton, i.e. 745,588,236 kg of raw cotton per year.
The demand for raw cotton from the existing ginneries is not expected to increase since they are old
and operate at frequent breakage and maintenance. But, there are three additional ginneries that are
expected to join the market at an average capacity of 23,046 metric tones of lint cotton per year per
unit to make the additional planned capacity to be 69,138,000 kg of lint cotton or its equivalent raw
cotton requirement of 203,347,059 kg of raw cotton per year based on 34% conversion ratio and
expected to join the market in 2010/11 to make the aggregate demand to be 745,791,584 kg of raw
cotton per year.
2. Handloom Cottages Demand

According to the assessment of UNIDO Cluster Development Program, there are about 400,000
hand loom industries in Ethiopia. When this is compared with CSA’s year 2002 statistical abstract
data of 2001/02 that stated the existence of 297,987 textile and apparel making cottages/crafts, one can
see that the average growth rate of hand looms cottages number is 5% per year between 2001/02 and
2007/08. As far as the composition of the raw materials they are using, lint cotton takes the lions
share than man made fibers. The requirement of lint cotton is derived from their capacity to consume
raw cotton since they are producing their own lint cotton in traditional way. The estimated lint cotton
requirement of hand loom industries in Ethiopia for the year 2007/08 is 187,562,000 kg per annum
or its equivalent of raw cotton 551,652,941 kg. The supply of raw cotton to hand loom cottages is
from small holder peasant farmers within the country.
3. Total demand of raw cotton

As described above the total demand of raw cotton primarily comes from ginneries, and handloom
cottage industries in Ethiopia. The demand from both streams is projected as shown below.
47
Table: - 5.7. Demand projection of raw cotton in (kg)
Planned Handloom
Existing Ginneries in tones
Year Ginneries in Cottage kg Total demand
(kg)
kg
2009/10 745,588,236 - 608,197,367 1,353,785,603
2010/11 745,588,236 203,347,059 638,607,236 1,587,542,531
2011/12 745,791,584 - 670,537,598 1,416,329,182
2012/13 745,791,584 - 704,064,477 1,449,856,061
2013/14 745,791,584 - 739,267,701 1,485,059,285
2014/15 745,791,584 - 776,231,086 1,522,022,670
2015/16 745,791,584 - 815,042,641 1,560,834,225
Sources: MOTI and case team manipulation.
B. Supply of Raw Cotton

1. Domestic Cotton Production
Raw cotton is produced in varies places of the country at different scale by state farms, private
commercial farms and peasant farms and extensively grown in irrigated lowlands and in warmer mid
altitudes under rain fed or irrigated farms. There are five state owned enterprises producing cotton
in the country. These are Tendaho, Middle Awash, Upper Awash, North Omo and Abobo out of
which four of them are currently rented to private investors. During the period 2003-2006, these
state enterprises cultivated about 13,000 ha of cotton land per annum using irrigation, which is only
42% of the pre-reform level. The state farms harvested 25,000 MT of raw cotton annually during the
same period. State farms account for 31% of the total national cotton area under cultivation. The
decrease in cultivated area of the state farms was mainly due to the transfer of land to peasants and
private commercial farmers. The newly emerging private commercial farmers and smallholders
account for about 42% and 27% of the total cotton area cultivated, respectively. From the land under
production 110,000 hectares in the year 2003/04, 56,000 hectares was under small holders and from
the total production of 136,000 tones 36,400 tones is estimated to be from small holders.
48
Table 5.8: Area cultivated under cotton and it’s Production in Ethiopia
Year Areas under cotton (ha) Total production (kg) Percentage change
2003/04 110,000 136,800,000
2004/05 125,000 137,500,000 1%
2005/06 120,000 144,000,000 5%
2006/07 122,000 140,300,000 -3%
Base amount - 140,300,000 -
Average - - 1%
Source: MOA&RD & www.icac.org
After government transition, the reduction of production in 2006/07 and 2007/08 is due the effect of
land transfer to peasant farmers and the less productivity of large area under state farms. The change
of this situation and the rent of land which was under state farms to private investors has brought the
increment of production to 38 % in the year 2008/09.
C. Demand Supply Gap

Despite Ethiopia has high potential of producing raw cotton it is not organized and its development
is stunted and slow pacing as compared to the economic development of the nation. The average
production of raw cotton in the country during 2003/04-2007/08 is limited to 139,650,000 kg of raw
cotton per annum including small holders.
This shows that the total raw cotton production of the country is insufficient to cover the annual
processing capacity of the ginneries, which means that if the total raw cotton production of the
country is supplied to the existing and under reviewed planned ginning factors, it covers only 15% of
the annual capacity. Thus, to utilize the current capacity of ginneries, the raw cotton production of
the country has to be increased by enormous amount. This demand supply gaps of raw cotton still
calls for the establishment of new cotton farms, improvement of productivity, and expansion of
existing farms. Based on this the following demand supply is projected. The projection starts from
the last recorded volume of 140,300,000 kgs in the year 2006/07 than the average since the preferred
number is more relevant to the preceding year’s records expected to increase by 1% per annum..
49
Table:-5.9. Demand supply gap projection
Year Total demand(kg) Total supply (kg Demand/Supply
gap(kg)
2009/10 1,353,785,603 144,078,769 1,209,706,834
2010/11 1,587,542,531 145,360,841 1,442,181,690
2011/12 1,416,329,182 146,654,322 1,269,674,860
2012/13 1,449,856,061 147,959,313 1,301,896,748
2013/14 1,485,059,285 149,275,916 1,335,783,369
2014/15 1,522,022,670 150,604,235 1,371,418,435
2015/16 1,560,834,225 151,944,374 1,408,889,851
5.8. Markets & Marketing Arrangements for Raw Cotton

Cotton is one of the most complicated commodities in the world to market successfully. In other
commodity markets, the tendency in the past fifty years has been for end users to purchase
increasingly from producers, with a subsequently decreasing role for traders. Examples of this can be
seen in the development of supermarkets’ outsourcing and extremely active metals exchanges
(especially in Europe). In the cotton sector, however, traders still play a pivotal role, especially in the
marketing of cotton from developing and transition economies. The reason for their continued role is
the existence of high transaction costs—ones which end users are prepared to pay a premium to
avoid. Of course, this is not to say that traders do not play an important role, but it highlights the
necessity to minimize transaction costs and therefore strengthen the connection between end users
and producers. Examples of transaction costs are uncertainty in delivery times, inaccuracy in quality
certification, lack of bale by bale classing and sale, opaque marketing systems, transport difficulties
and overly bureaucratic export procedures.
One of the reasons for decreasing participation of traders in developed countries has been the
increasing size and sophistication of cotton farmers. Corporations such as Boswells in the USA now
farm thousands of hectares of cotton and have entered into direct contracting relationships with
major textile concerns throughout the world. Due to the size of their operations and their ability to
control the timing and quality of their production, they are able to offer end users the type of service
that enables direct relations.
50
Where the land holdings of farmers are smaller (for example in Australia) and therefore production
lower, farmers tend work together in marketing their cotton in what is termed a “pool.” As opposed
to selling their cotton to traders as a principal, these cotton pools enter into agency agreements with
traders, who act as their sales agents. In this situation, the traders receive a percentage of the value of
the final sale to an end user. The advantage of this form of marketing is that it enables farmers to
enter into a reactive relationship with end users and they are therefore much better able to assess and
reply to changes in demand. It should be noted that the farmers in the pool operate individually and
therefore there is no shared responsibility either at production or marketing. Effectively they pool
their production so that they have parcels of goods of sufficient volume that they are able to service
one or a number of end users.
The most successful mass marketing tool that has developed for cotton is the baled cotton auction
system. The best example of such a system is the NYCE (New York Cotton Exchange), which is
now a highly sophisticated market, involving the sale of not only physical bales, but also futures
contracts, options, swaps and other cross market derivatives. In its simplest form, a cotton auction is
a place where a large number of sellers are able to access a large number of buyers in a transparent
situation and where there the open competition amongst buyers ensures maximum sales prices. The
advantage for buyers is that, while farmers may be fragmented by number and over a large
geographical area, their production is brought to one point of sale—the auction. This means that
buyers do not have to spend large amounts of time and money traveling around and sourcing cotton
from a large number of sellers (a major transaction cost).
In order for an auction or exchange system to operate efficiently, it is crucial that the quality and
availability of parcels of cotton that are offered for sale are dependable. While this is ultimately the
responsibility of the seller, the confidence of buyers in the auction system is dependent upon it.
Therefore, any auction has to introduce stringent physical and monetary sanctions on parties using
the auction that are applied if they are found to be in breach of a concluded auction contract.
51
While NYCE is the leading example of a cotton auction system, the leading example of a developing
one is the Commodities Exchange system in Turkey. Although this started out as merely a quotation
forum (i.e. a place where the prices of cotton sales were reported, not concluded), its use as a
marketing platform is increasing. Many traders and end users now purchase Turkish cotton from the
exchange, as opposed to concluding contracts direct with farmers. The reason for this is that they have a
higher degree of confidence in performance of the contract if they conclude it through the exchange (because
the cotton clearly exists and they have financial protection through the exchange that they cannot achieve
through the Turkish legal system).
Another advantage of an auction system is that it leads to the creation of a truly indicative price for
cotton from the relevant origin. As discussed above, the problem for developing and transition
countries is that the price for their cotton is based on reported offer and bid prices, which may or not
be accurate. The further problem is that, in order to relate these prices back to non CIF delivery
terms, they have to make theoretical deductions. This is a very inaccurate method or relating prices
to the reported market price, where higher demand from certain points of delivery may actually
mean that these deductions are not applicable.
As mentioned above, the trend in other commodity markets is for end users to enter into direct
purchasing relations with producers. This is also true in cotton, but has only begun to develop in the
past five years or so. Several major international textiles companies (for example IKEA) are trying
to enter into production agreements with cotton producers in order to improve dependability of
delivery and quality. There is no doubt that this will be an increasing trend and will involve
production agreements and increased use of auctions (where they are available).
An area of marketing that is likely to develop for transition and developing countries is in the area of
“Fair Trade” of goods. These are marketing initiatives based on the procurement of produce direct
from producers in such countries (at prices higher than they generally receive from the mass market)
and then sold on this basis in developed countries. The transactions are generally handled by NGO
and non-profit making organizations. Generally, these products are more expensive than traditionally
sourced goods (due to lack of economies of scale and higher transaction costs).
52
However, consumers in developed countries are prepared to pay these premiums as they believe that
they are helping to benefit producers in developing and transition countries. To date, the main
developments in fair trade products have centered on cocoa and coffee. With the help of the
international development community, it is hoped that other commodities (such as cotton) could also
be brought within this system.
In Ethiopia, raw cotton is sold at the farm gate to ginneries or processed in the farm in the case of
farms having their own ginning machine. In the case of farm gate sales, owner ship transfer and
covering of transportation, transit insurance and other related costs depends on the agreement of the
farm and the purchasing ginning factory owners. All of the raw cotton produced is processed locally
or delivered to local market, which means that there is no export of raw cotton from the country. As
per the information obtained from some commercial farms the purchaser is accountable to cover all
costs after sales which could be transport costs and other charges for local sales. The handing over of
the commodity is directly at the farm get. Since there is no export of raw cotton there is no market
arrangement for raw cotton export.
5.9. Cotton Marketing Channel

Cotton is grown as a cash crop and passes through different channels before it reaches the end users.
The marketing chain of cotton is as portrayed on the following chart showing cotton supply chain in
local and export market after lint cotton is produced.
53
Chart 5.1 cotton supply chain
Producers
Small holders Commercial State farms
private farms
Hand loom & Ginneries Lint

hand crafts Cotton
men
Export
Textile
Seed Lint
cotton for cotton to
Oil mills Spinning Garment
& apparel
Consumer
Edible oil Dairy and fattening
Retailer Edible oil

whole seller
The commercial and private farms supply raw cotton to ginneries; the ginneries in turn supply the
product of ginneries (lint cotton) to spinning factories. The spinning factories intern produces yarn
and supply it to textile factories. The textile factories produce fabrics from the cotton yarn and
supply their product to garment factories. The garment factories produce different types of cloths
and finally export their output. The textile factories themselves some time export the lint cotton
received from ginneries by themselves. The ginneries them selves some time export the produced
lint cotton to external market. The cotton seed supplied to oil mills produces edible oil and oil cakes.
The edible oil will be supplied to the community through edible oil whole sellers and retailer traders
to the community, while the oil cake will be supplied to dairy and production for animal feed. The
small holder cotton producers supply their produce to ginneries or hand loom and handcrafts
men .The hand loom and handcrafts men produce different types of clothes and supply it to
consumers or retailers.
54
5.10. Storage Facility for the Product
Cotton by its nature is produced in bulk and requires much space for storage. In Ethiopia cotton
producers wish to get money automatically after cotton sales to use the money obtained for the next
cultivation. But ginnery owners have financial limitation to afford to pay all this sales volume
besides lack of sufficient ware houses to store the purchased raw cotton. This in turn calls for cotton
export having being not fulfilled the local demand. Someone wishing to be involved in cotton
industry whether it be cotton grower or ginnery owner has to think for sufficient capital and storage
facility in the business arrangement.
5.11. Prices Trend Development

Price variations in cotton may be attributed to a number of factors. Cotton prices vary, in particular,
depending on the variety grown and the quality of the harvested cotton. Overall, fluctuations in
cotton prices are determined by several factors, in particular: shifts in the level of demand and
supply, which reflect changes in producing countries' cotton policies and effects of quality
parameters in setting prices. Market sentiment is tight at the moment based on supply and demand
factors and therefore any short term change in supply (e.g. bad weather) or demand (e.g. economic
slowdown in China or revaluation of their currency) would have a strong effect on the market price.
What this means is that we are likely to see quite high price volatility on an annual basis. The main
threat currently to medium term prices comes from a global recession and cotton price is very
volatile in nature due to some factors influencing the market situation.
Three Crises Affecting the World Cotton prices

Since 2007/08, the world cotton market has been affected by three successive events: a global
commodity price crisis, which resulted in higher agricultural production costs and reduced world
cotton area; a crisis in the cotton futures market, which hurt cotton trade mechanisms; and a global
financial and economic crisis, which has had multiple effects on cotton mill use, trade and
production.
55
The Global Commodity Price Crisis
Prices of most commodities increased significantly between 2003 and the first half of 2008. This
increase accelerated considerably starting in 2007. Crude oil prices increased from USD 29 per
barrel in 2003 (annual average) to USD 133 per barrel in July 2008. The increase in energy prices
triggered an escalation in fertilizer prices starting in mid-2007 and ending in the middle of 2008. The
World Bank fertilizer price index increased by a factor of ten between 2003 and July 2008, and the
rise in energy and fertilizer prices generated an increase in agricultural production costs. In addition,
the level of stocks relative to the use of major food crops had been declining for some time, making
their prices more sensitive to shocks. Demand for some food crops was boosted by government bio-
fuel subsidies and mandates. Weather-related crop failures, speculation and some government policy
decisions contributed to higher food crop prices during 2007 and the first half of 2008, and prices of
many food crops remain higher than long run averages yet.
Fertilizers account on average for around 20% of overall cotton production costs, but there are large
regional variations, depending on soils, weather, crop rotations and management, and the intensity of
fertilizer use. Cotton is generally more expensive to produce than soybeans, maize and wheat.
Cotton requires larger quantities of fertilizer than soybeans and wheat, and larger amounts of
pesticides and fuel (if machine labor is used) than soybeans, maize and wheat. As a result, cotton
production costs have been relatively more affected than these other crops by the crude oil and
fertilizer price increases.
Prices of cotton’s main alternative crops (grains and oilseeds in particular) have become more
attractive than cotton prices over the last few years. This trend accelerated during 2007 and in the
first half of 2008. As a result, in the countries where shifts in acreage among crops were possible,
many farmers opted out of cotton production to turn towards production of alternative crops. Higher
cotton production costs and more attractive prices for alternative crops were the main factors
explaining the decline in world cotton area in both 2007/08 and 2008/09.
56
The Cotton Futures Market Crisis
Futures prices were extremely volatile during March 2008, mostly because of increased speculative
activities at the Intercontinental Exchange (ICE) and volatility in prices of competing commodities.
The short-lived spike in futures prices caused a liquidity crisis. As a result, some merchants hedging
their positions at the exchange were faced with huge margin calls and were forced to liquidate their
positions at a loss. Many merchants could not recover from these losses in the physical market.
Some were driven into bankruptcy and others decided to go out of the cotton business.
Other consequences of the March 2008 events are a decrease in banks’ trust in the cotton futures
market and a tightening of credit for merchants’ margin calls, a reduced trust of cotton market
participants in the mechanisms of the futures market, and difficulties for merchants to purchase in
advance and at fixed prices large quantities of cotton (as was commonly done before the futures
market crisis).
The Global Financial and Economic Crisis

The world economy expanded robustly in 2007, for the fourth consecutive year, spurred by rapid
economic growth in developing countries. However, August 2007 marked the beginning of a period
of global economic deceleration and crisis in the functioning of the housing, financial and
commodity markets. According to the January 2009 projections of the International Monetary Fund
(IMF), global economic growth decelerated from 5.2% in 2007 to 3.4% in 2008. On March 31, 2009,
the First Deputy Managing Director of the IMF announced that the Fund is expecting global
economic growth to contract by 0.5% to 1.5 % in 2009, with only a very gradual recovery beginning
in 2010. The World Bank’s (WB) projections published on March 30, 2009 forecast a contraction of
1.7% in global economic growth in 2009 and a recovery to 2.3% in 2010. The global economic
outlook for 2010 remains very uncertain.
While the two crises mentioned earlier primarily affected cotton production and trade, the global
economic crisis is influencing mainly textile purchases by end-use consumers and therefore cotton
consumption. In addition, tightening credit conditions for textile mills are slowing their purchases of
raw materials, including cotton.
57
In some countries (for example in Europe and in the United States), the global economic crisis is
accelerating a decline in cotton mill use that started many years ago, due to other factors. In other
countries such as China (P.R.) and India, the two largest industrial users of cotton, cotton mill use is
contracting in 2008/09 for the first time in many years. China (P.R.) accounts for around 40% of
world cotton industrial consumption. Mill use in China (P.R.) rose by an average annual rate of
nearly 11% between 1998/99 and 2007/08. However, 2008/09 mill use in China (P.R.) is projected at
9.0 million tons, a decline of 17% from the 2007/08 level. Likewise, Indian cotton use rose at an
average rate of about 7% over the last five seasons, but a decline of 6% to 3.8 million tons is in
2008/09. The current decline in cotton mill use in these two countries was unexpected in early 2008.
The global economic crisis, through its impact on world cotton mill use, is also affecting cotton
trade, stocks and production. Finally, the tightening of credit conditions worldwide will also affect
world cotton production in 2009/10, as it is making it more difficult for cotton producers to finance
their input.
Impacts of the Crises on the African Cotton Sector

Africa accounted for 5% of world cotton production, 2% of world cotton mill use and 13% of world
cotton trade in 2007/08 (almost all African cotton is exported). These relatively small market shares
imply that the African cotton market has a minor effect on the world cotton price and is therefore
dependent on what happens in the rest of the world. According to the IMF projections published in
January 2009, economic growth in Africa could slow from 5.2% in 2008 to 3.4% in 2009.
African cotton production declined each season from a record of 2.0 million tons in 2004/05 to 1.2
million tons in 2008/09, due mainly to decreases in area, but also partly to declining average yields.
Cotton exports have also declined over the same period, from 1.5 million tons to 0.9 million tons.
The share of African exports in the world total declined from 19% to 14% over this period. The
significant decrease in African cotton production over the last few years was driven by a fall in
production in the African Franc Zone and North Africa. Production in East and Southern Africa
dropped from 2004/05 to 2006/07 but recovered in the following two seasons.
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There are no direct government payments to cotton producers in Africa. Cotton production in the
continent is therefore responsive to variations in world cotton prices. Lower international cotton
prices, aggravated in many countries by an unfavorable exchange rate, had already weakened the
African cotton industry in the seasons preceding the crises. While the commodity price crisis has not
had a significant direct impact on African cotton area, due to the lack of alternative crops in many
regions, the rise in agricultural production costs resulted in declines in cotton area and/or yields
(when farmers applied lower quantities of fertilizer than usual). The crisis in the cotton futures
market has not had a significant direct impact on the African cotton industry, as most African cotton
companies make little use of hedging instruments. However, the cotton futures market crisis has
affected the ability of international traders to buy large quantities of African cotton early in the
season, at fixed prices. This will likely harm the finances of cotton companies and ginners. Finally,
African cotton exports have been affected (as have exports from other regions) by the decline in
demand from consuming countries in 2008/09. Also, the tightening of credit conditions due to the
global economic crisis will make it difficult to finance 2009/10 production inputs, in a continent that
is already facing high interest rates. African cotton production is projected to continue to decline by
2% in 2009/10, driven by an expected further reduction in cotton area in the African Franc Zone.
However, production in Egypt is projected to increase. Exports from African countries are expected
to increase in 2009/10 to 980,000 tons.
In summary, the three global crises affecting the cotton market have worsened an already difficult
situation for the African cotton industry. This situation could be alleviated by a weakening of local
currencies vs. the US dollar (which would soften the decline in cotton prices at the local level)
and/or an increase in cotton productivity.
Conditions in Place for Longer Term Growth

Despite the current difficulties, cotton remains a viable commodity of wealth, employment and
growth in the long run. With a rebound in world economic growth expected to begin in 2010 and
improve in 2011, demand for cotton will strengthen again. Technologies changes in cotton
production are contributing to both higher yields are reduced environmental impacts, creating the
conditions for long term growth in the cotton sector. Further, consumers over the world prefer
natural, renewable and comfortable cotton in apparel and home furnishings.
59
World consumption of cotton reached a record of more than 26 million tons in 2007, and a return to
that level is likely within a few years after the economic recession has run its course. The attempt to
collect the price of raw cotton from cotton farms was not successful since most of the farms do not
sell raw cotton except lint cotton, however, some practices obtained from Africa cotton farm which
is found in middle awash, raw cotton sales value per kilo gram is as shown below.
Table 5.10:- Raw cotton price trend

Year Price/kg in birr Percentage change
2004/05 3.00 -
2005/06 3.00 0.%
2006/07 3.25 8.3 /%
2007/08 4.80 47.7 /%
2008/09 4.20 -12.5 /%
Average 3.65 10.9 /%
Source: Africa cotton farm
According to the information obtained above, the price of raw cotton has an increasing trend for the
years 2005/06 to 2007/08, which could be due to a reduction in area under cotton production which
contributed to a reduction of total cotton yield and establishment of additional spinning factories that
demand lint cotton from the existing ginneries for consumption. The decrease in cotton price in the
year 2008/09 is due to the effect of world economic crises that forced cotton growers to sale raw
cotton locally instead of exporting lint cotton and contribute to local supply and resulted in
decreased price of raw cotton. Generally, the overall performance of raw cotton price has an
increasing trend by 10.9%.
Price Hedging/Risk Management

The ability of a farmer to manage his market risk (from planting to sale) is an integral part of his
sustainability over the medium to long term. In its most simple terms, this is achieved by reserving
profits in good years to cover cash shortages in the bad years—a simple approach to price
stabilization. Successful examples of such price stabilization funds have been achieved through the
operations of farmers’ groups in Benin and Burkina Faso.
60
In countries where there are stable land markets or sound banking institutions with low inflation, the
farmer may decide to either invest in land or place such monies on deposit. Of course, where a
farmer has a land parcel of suitable size, they are able to hedge their seasonal risk through
diversification of crops and holding livestock.
However, the drive by farmers and end users to manage their related price risk has led to the creation
of futures markets. Effectively, if a farmer knows his costs of production, he will seek to sell a
volume of cotton equal to his costs (as a futures contract) in advance of delivery. In the absence of
organized, traded futures markets (as discussed below) many producers attempt to achieve the same
result through the forward sale of their crop at a determined price at the beginning of the season to a
seed cotton or baled cotton off-taker. This practice of forward sales outside of a futures market is
regularly practiced throughout Western Africa.
With his price locked in, at least the farmer knows that he will not lose money in that season (his
cost having already been covered). If the market rises or falls after this point, the market movements
will merely affect the amount of profit that he makes. For an end user, they have to conclude long
term sales contracts in advance of delivery of their cotton. This leaves them with a major risk in
pricing their contracts and therefore they would prefer to lock in the cost of their cotton as soon as
possible. Given this interest on the part of both parties, the practice of sales of futures contracts was
introduced on NYCE. In modern exchanges, negative movements in the values of futures contracts
are managed by the payment of what are referred to as margin calls. When a party buys a futures
contract, he is not actually expected to pay for it until the date of maturity of the contract. However,
if the value of the future falls over time, the loss in value needs to be covered by the buyer via the
payment to the exchange of the difference in the two prices (the margin call).
Since its original inception, the futures market has become ever more complicated with the
development of a large number of products now available at the exchange. The most notable of these
are the use of options (calls and puts), which are basically the sale (or purchase) of the right to sell or
buy a cotton contract at a given price. The best analogy for options is the insurance market, whereby
people purchase insurance to cover their risk in the situation where a certain event occurs.
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In the case of options, there is a cost which is similar to an insurance premium, in that the cost of it is
dependent on how likely a price move is. The advantage of options, as opposed to futures themselves
is that all that a buyer (or seller) needs to do is to pay the premium and is not required to make
margin calls (which can amount to several million dollars depending on the size of the transaction
and the change in the market).
For buyers and sellers of American cotton, NYCE and its futures/options market is a “perfect”
hedging tool. This means that the commodity which they are buying or selling is replicated by the
contracts that are available at NYCE. NYCE is also a viable management tool for Australian
farmers, as their cotton is priced according to NYCE and based on the same quality standards. For
parties involved with other growths, NYCE is an “imperfect” hedge in that their cotton is sold
according to a different pricing structure and often according to different quality standards. The
other problem for these parties is that the currency in which they trade the cotton or incur costs of
production is not US Dollars. This latter problem can be overcome by the use of currency hedging
markets or by cotton derivatives (which are futures contracts based not only on the change in the
NYCE price, but also in relation to the base currency). The latter option is only available to farmers
or traders operating in freely convertible and internationally traded currencies.
For traders in non-US cottons, NYCE can be used as a price risk management tool and this is known
as “basis trading.” The general principle here is that when a trader fixes the price of his sale or
purchase, he takes a futures or options position to lock in his basis. In this situation, the basis is the
differential between the price at which he bought the cotton and that which he has sold it for. Due to
his position on NYCE, a rise or fall in the market will be countered by the option or future and he
has therefore managed to guarantee his profit level, even though one part of the transaction may not
have a price fixation (which would normally leave him with a market risk).
5.12. Cotton Quality Standard for Cotton Marketing

Cotton, as a natural cellulose fiber, has a lot of characteristics, such as, comfortable soft hand, good
absorbency, color retention, prints well, machine-washable, dry-cleanable, good strength, drapes
well, easy to handle and sew.
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Grading of cotton quality takes into account:
 length
 uniformity
 diameter
 strength
 maturity
 colour
 amount of foreign matter
 Character.
The grade is given by the external appearance of the cotton and is determined on the basis of the
major or minor brightness of the fibers, by its more or less white color, by the major or minor
presence of particles of the leaf or other extraneous substances.
Color
The color of cotton samples is determined from two parameters: degree of reflectance (Rd) and
yellowness (+b). Degree of reflectance shows the brightness of the sample and yellowness depicts
the degree of cotton pigmentation. The color of the fibers is affected by climatic conditions, impact
of insects and fungi, type of soil, storage conditions etc. There are five recognized groups of color:
white, gray, spotted, tinged, and yellow stained. As the color of cotton deteriorates the process
ability of the fibers decreases.
Length
The length is the most important attribute of the fiber. In this regards, cotton is divided into two large
categories: long fiber cottons (long staple), which measures more than 28 mms and amongst which
Sea Island in the United States holds the record and the Egyptian Makò and Sakellaridis which arrive
at and sometimes overreach 50 mms, and short fiber cotton (short staple), that do not reach the
length of 18 mms and that derive from the Asian regions; there is also an intermediate category of
cottons whose fiber length is included between 18 and 28 mms, such as those from the United States
Uplands and which constitute the grand mass of the world production, 60% and more.
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Fiber Strength
Fiber strength is measured in grams per denier (g/d) or centi-newton per tex cN/tex. It is determined
as the force necessary to break the beard of fibers, clamped in two sets of jaws, (1/8 inch apart). The
breaking strength of cotton is about 3.0~4.9 g/denier, and the breaking elongation is about 8~10%.
Character
The character is the attribute determined with more difficulty. It is in part connected with the origin,
variety and maturity, but at the end a cotton of good character is that whose fibers are the most
strong and robust, so as to resist traction and breakage, homogenous and uniform, so as to produce
few losses in working, and have a complete physical-chemical constitution, so as to give the cotton
mass notable solidity and compactness, smoothness and silkiness.
Trash
A trash measurement describes the amount of non-lint materials (such as parts of cotton plant) in the
fiber. Trash content is assessed from scanning the cotton sample surface with a video-camera and
calculating the percentage of the surface area occupied by trash particles. The values of trash content
should be within the range from 0 to 1.6%. Trash content is highly correlated to leaf grade of the
sample.
Extraneous matter
extraneous matter is all the material in the sample other than fiber and leaf. The degree of extraneous
matter is determined by the classer either as "light” or "heavy".
Length uniformity
Length uniformity or uniformity ratio is determined as “a ratio between the mean length and the
upper half mean length of the fibers and is expressed as a percentage".
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6. ORGANIZATION, MANAGEMENT, AND MAN POWER REQUIREMENT
6.1. Organization and Management
Cotton farming in Ethiopian is undertaken using rain fall and irrigation systems. The farming
activity which is under taken using irrigation system by its very nature demand not only qualified
agricultural engineers, plant scientists and agronomists but also highly experienced management
bodies.
The modern cotton production process is becoming more complex in that the cotton fiber will have a
market and reasonable price if it is produced as per the standard requirement of the buyers. The
production of cotton is also found to be among the highly environment polluting agricultural
activities. The child labor and low wages are also some of the social problems associated with cotton
framing activities, particularly in developing countries.
Hence, to engage in a sustainable cotton production practice the management has to deal with such
problems properly. The management is also expected to properly identify the opportunities and the
ways to exploit them; to forecast risks and threats and to design ways to minimize or diversify the
risks; and also the capacity of the management in changing the threats to opportunities is also very
important.
Universities like Haromaya and Hawasa have been graduating students trained on agriculture and
crop management .Therefore; it is difficult to assume that there is a problem of trained management
force in cotton farming business. But the real problem comes when we consider the willingness of
the individuals to work in hot temperature areas where cotton farming lands are sufficiently available
with very small salaries and fringe benefits. For the proper functioning of a given organization the
way it is organized is very important. The organizational structure of a typical cotton farm would
have the following structure.
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Farm manger
Executive Secretary
Production manager
Planning head & assistant
Medical pool
Technical manager Administration head Finance head
Secretary
Record
Accountants
Cashier
Farm Work Prote Research Unit farm Store Head Personnel
mechan shop ction Head manager
ization head head
head Secretary Guards Messenger
Input and product store
Spare part store

Supervisor
Supervisor
Maintenance
Greece boys
Mechanics, electrician,
Field scouts
Field assistants
Time keeper
operators
Tractor
Guards
Camp head Figure 6.1: Management Structure
66
Farm organization
One cotton farm has set a manageable maximum farm size of 500 hectares. The farm is
further classified into small manageable plots (sections). These plots are formed in such
away that it is convenient for irrigating the farm following primary canal, secondary
canal, tertiary canals, and feeder canals. The plots may have equal size or may not be of
equal sizes depending on the suitability of the farm site for irrigation. There is a farm
road of width 7 meters between each section for product and input transportation.
Block
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6.2. Man Power Requirement
6.2.1. Skilled Manpower
The establishment of cotton farming project needs the availability of skilled man power
both for direct agricultural activities and administrative works. Currently, the country is
in better position in training students in agricultural and technical disciplines at the TVET
and University levels.
The major problem when trained man power in cotton farms is concerned, most workers
are not delighted to work in harsh climatic areas where cotton production flourishes. The
opportunity cost of working in these areas is very high, where as the salary and the
benefits which are provided for the workers by the farms do not compensate the cost of
working in these areas. An individual who decided to work in cotton farms (particlary at
River Awash and River Omo Valleys) not only forgone the social and cultural ties he
used to attain in the highland areas but also it is required to well understand the way of
life of the pastoralist people who live in cotton belts. In Ethiopian, the areas where cotton
well flourishes are known to be malaria infested. So, a given project owner has to well
assess the availability of skilled man power before deciding to invest in irrigated cotton
farms and has to prepare all required precaution arrangements for the workers protection.
6.2.2. Unskilled Manpower Requirement

Currently, in Ethiopia, most commercialized cotton farming activities are semi
mechanized (undertaken in both machineries and laborers). The up-to-date cotton
farming technologies allow undertaking of all farming, harvesting and picking activities
using machineries. The deployment of technologies in a given cotton farm depends on the
capital position of the firm; and the trained and skilled labor to work with agricultural
machineries. For all, in current Ethiopian cotton farms where the survey has been
undertaken casual workers particularly during the time of picking are very important.
During picking operation a large number of workers are needed. The experience of farms
currently operating in the industry shows that they recruit the laborers from the Southern
Part of the Country and in rare cases from Northern Part of the Country where man power
is excessively available at reasonable cost. The question of availing laborers during
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picking does not only requires transporting of laborers from their resident area, but it also
requires paying unreasonably high wage not to let them go to other surrounding farmers
with marginal salary increment.
The other problem associated with unskilled laborers is that they may not have the
required skills of working in cotton farms. This beyond increasing the training cost, it
also have a big problem in the quality of the produce.
6.2.3. Incentive Schemes

The experience at the surveyed cotton farms shows that there are no standardized
incentive schemes which initiate the workers to produce more and to increase their
productivity in general.
Table 6.1: Administrative man power Requirement

Sr. Position No. Minimum Requirement Alternative
No required Qualification Experience Qualification and
experience
1 Farm manager 1 MA in Agriculture 8 yrs, of which BA in Agriculture, 12
and trained on in 4 of them years exp, of which in the
General Management served in Higher 6 of them served in
Management Higher Management
Positions Positions
2 Executive secretary 1 Diploma in 6 years TVET (10+2) in
Secretarial Science secretarial Science and
and Office Office Management,8
Management years exp.
3 Messenger 1 6th grade complete - -
4 Production manger 1 MA in Agriculture 6 years, of BA in Agriculture 10
and trained on which in the 2 of years exp, of which in the
General Management them served in 4 of them served in
Higher Higher Management
Management Positions
Positions
4 Technical manager 1 BSC in Agricultural 4 years working Diploma in Agricultural
Engineering in technical and Engineering ,6 years
other related working in technical and
Works other related Works
5 Farm mechanization 1 BSC in Agricultural 4 years working Diploma in Agricultural
head Engineering in technical and Engineering ,6 years
other related working in technical and
Works other related Works
5 Supervisors 20
7 Tractor operators - 8th Grade Complete 2 years of -
69
experience
experience
8 Work shop head BSC in Agricultural 2 years of -
or Mechanical Experience on
Engineering the profession
9 mechanics 5 TVET Diploma in 4 years of -
Mechanization Experience on
the profession
10 Electricians 10
11 Field mechanics 40 TVET (10+2) in 4 years of TVET (10+1) in
Mechanization Experience on Mechanization, 6
the profession years of Experience
on the profession
Greece boys 10 6th year grade - -
complete
4 Plant protection 1 BSC Degree in Plant 6 years of Diploma in Plant Science,
head Science Working his 8 years of Working his
profession ,2 in profession out of which 4
management of them in management
positions positions
4.1 Field scouts 4 - - -
5 Research head 1 BSC in Agronomics 2 Years Diploma in Agronomics
or Plant Science or Plant Science and 4
years pf experience
5.1 Field assistants 3 BSC in Agronomics 0 years Diploma in Agronomics
or Plant Science or Plant Science and two
years of experience
6 Unit farm manager 10 BA in Agriculture 6 years, of Diploma in Agriculture
and trained on which in the 2 of 10 years exp, of which in
General Management them served in the 4 of them served in
Higher Higher Management
Management Positions
Positions
6.1 Secretary 1 Diploma in 3 years TVET (10+2) in
6.2 Supervisors 20 -
6.3 Camp head 1 12th grade - -
complete
6.4 Time keepers 3 and 12th grade - -
variable complete
6.5 Guards 8 8th grade complete - -
7 Store Head 1
7.1 Assistants 2
( input & product
store)
7.2 Book keepers 3
70
experience
(spare part store)
8 Administration 1 BA Degree in 4 Years Diploma in Personnel
head Personnel Management, Public
Management, Public Administration, 6 Years
Administration exp
8.1 Secretary 1 Diploma in 3 years TVET (10+2) in

8.2 Personnel 1 BA Degree in 2 Years Diploma in Personnel
Personnel Management, Public
Management, Public Administration and 4
Administration years exp
8.3 Messenger 1 - - -
th
8.4. Guards 4 10 grade - -
complete
8.5 Maintenance 2 TVET (10+1), - 10th complete and 2 years
General Mechanics I of experience of
Certificate maintenance
8.6 Record 1 12th grade - -
complete
9 Finance head 1 BA degree in 4 years Diploma in Accounting,
Accounting 6years exp.
9.1 Accountants 2 TVET (10+2), 2 years -
Accounts Clerk II,
Certificate
9.2 Cashier 1 TVET (10+2), 2 years 10th grade complete and 4
Accounts Clerk II, years exp
Certificate
10 Plan and 1 BA degree in 4 year of Diploma in
Programming head management experiences in management ,Economics/
Economics/Agricultu his field of Agricultural Economics, 6
ral Economics Specialization year of experiences in his
field of Specialization
10.1 Assistant 2 BA degree in 2 years of Diploma in
management experiences in management ,Economics/
Economics/Agricultu his field of Agricultural Economics, 4
ral Economics Specialization year of experiences in his
field of Specialization
11 Medical pool
11.1 Nurses 2 -
11.2 Laboratory technician 1 -
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7. Environmental and Socio Economic Considerations of Cotton
Production
7.1. Environmental Considerations
Currently the condition of environment has been given a greater emphasis more than any
time else in history. Governments, Nongovernmental Institutions, Business
Organizations, and Consumers are bringing the issue to the forefront. On the other hand,
the media coverage on the issue of environment is growing. Documentary films on the
issue of environment are being produced by the giant mass media like BBC and CNN.
This is because the condition of environment is not only the question of healthy breath
and wastes free environment, but it is becoming the question of sustaining Fauna and
Flora, including human beings on the surface of the earth.
For a given business organization protecting the environment is not only as general as
protecting the surface of the earth for the continuation of life on the earth in the long run,
but also it is becoming the question of securing profit in the short run . Different interest
groups are being established which are aimed at banning goods and services produced at
hazardous conditions. The banning process goes as far as preaching at super markets and
stores, not to buy goods from producers that supply goods at environment unfriendly
ways. On the other face of the analysis, some governments are using the issue of
environment as trade barrier by restricting imports that are presumably produced at
environment unfriendly ways.
The cotton production activity is one of the environments polluting agricultural activity.
The cultivation of cotton involves the intensive use of water, the application of pesticides
and fertilizers, in appropriation of labor force and the abuse of child labor. The following
are some of the cotton production activities negative impact on the environment.
7.1.1. Land Preparation

In cotton production activity the negative impact on the environment commences from
the destruction of vegetation to prepare a land for cultivation. In Ethiopia, cotton farming
has been developing on large scale at the rivers valleys of Awash and Omo. In their lower
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course these rivers are known for their dense vegetation and wild animals. So the
cultivation of cotton in a given area has to be weighted against the destruction of wild
fauna and flora.
To preserve the natural vegetation and the wild life in these areas, one of the
improvement options can be to let a portion of the land to be cultivated as a habitat for
the remaining wild life.
7.1.2. Irrigation
Cotton production activity would be more rewarding if the cultivation is done using the
irrigation systems. Particularly, in countries like Ethiopia where there are abundant
hectares of land in rain deficient areas, the use of irrigation water is uncompromised. The
current experiences also show the same where most large scale cotton farms are situated
in these areas.
However, the irrigation practices in lowland areas may have so many adverse effects on
the soil. The common environmental problem associated with the irrigation practice is,
the salinity problem. Salinity is the accumulation of salts in the soil more than the
acceptable level. According to the information availed from
http://hopmans.lawr.ucdavis.edu/, Stalinization affects about 20-30 million ha of the
world’s current 260 million ha of irrigated land, and limits world food production.
Salinity reduces water availability to plants by the accumulation of dissolved mineral
salts in waters and soils due to evaporation, transpiration, and mineral dissolution.
The ions responsible for soil Stalinization are: Na, K , Ca, Mg and Cl1. Salinity occurs
+
on irrigation lands because of two main reasons. One of the reasons is the increase in
ground water table. Frequent irrigation of lands results in the increase in ground water
table. Low lands are also said to be reach in saline ground water. Ultimately, due to the
capillary action the ground water moves to the surface of the earth. Then the water
evaporates accumulating salts in the soil. The other reason is that irrigation activity by it
self increases the accumulation of salts in the soil. Irrigation water in low land areas
1
Respectively are the chemical symbol of sodium, potassium, magnesium, and chlorine
73
usually have comparable amount of dissolved salt in them. When this water is poured
over the soil, plants immediately absorb it, leaving behind much of the salt content. As
soil salinity increases, salt effects can result in degradation of soils and vegetation as it
makes difficult for plants to absorb soil moisture.
In Ethiopian the salinity problem is common particularly in Awash Valley farms. As the
information gathered during the survey showed in farms which have been cultivated for
more than thirty years the problem is making a portion of their plot to be left fallow.
The salinity problem can be overcome by:

 Construction of open ditches: This is used for removing large volumes of either
surface or subsoil water from land. This way of draining water is applicable when the
water table is near the surface of the earth and the slope of the land is too slight for
proper construction.
 Mole Drains: These are channels left by a bullet shaped device pulled through the
soil. These are short lived and practically not used in most developing countries.
 Other subsurface drains: These include any type of buried conduit with joints or
perforations that collect and convey excess from the soil.
7.1.3. Pesticide and Fertilizer Application

There are so many diseases (bacterial, fungal, nematodes, and viral diseases) and pests
that affect the growth and ultimately the yield of cotton plant. The diseases which
commonly affect the cotton production industry are nematodes; etc. The most common
insects in Ethiopian cotton production industry are African Ball Worm, Sudan Ball
Worm, Pink Ball worm, Cotton Aphid, Cotton white fly, Jassid, Red spider mites, Thrips
and others.
The cotton production industry is then heavily relies on chemicals insecticides and
Fungicides. It is the single crop in the world in utilizing largest crop pesticides. Studies
(www.Panna.Com and www. plantcultures.org) show that more than 25%of the world
pesticide usage is attributed to cotton production. Annually cotton producers pay 2.8
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billion dollars for the purchase of pesticides. The specific characteristic of cotton
pesticides is that they are broad spectrum chemicals that usually kill other beneficial
organisms.The chemicals used to eradicate insects and diseases from the cotton plants are
usually hazardous to human beings and other animals’ populations and microbiological
elements in the soil. In particular birds, fish, other beneficial insects are usually affected
by spraying of these chemicals. The series impact of cotton pesticides is that there are
cases when the spraying of chemicals results in the outbreak of more other insects. It is
because the spraying process kills other beneficial insects.
Particularly, during aerial application of the chemicals in cotton plantation farms there is
a chance of contamination of the neighboring areas through chemical drift or runoff. In
general the following major steps have to be taken if the chemical pesticide usage is
could not be avoided.
 Discussing with local communities, the workers and other stake holders about the
application program to reduce the impacts of the chemicals on human health;
 The major problem in pesticide usage arises during the preparation of mixes so proper
cautions have to be taken during the preparation of mixes;
 The correct and safe storage of chemicals;
 Pesticides have to be applied in safe conditions. The maximum wind speed has to be
15 km/hr;
 Availability of safety information when chemicals are applied;
 All chemicals storage tanks are well signed and emergency procedures are in place
and well understood;
The Practice of Integrated Pest Management System (IPM)

The IPM is a practice of keeping harmful insects below crop damaging threshold level
using different approaches. These include:
 The development of natural predator insects to crop damaging insects.
 The genetically breeding of cotton varieties which are less attractive to cotton pests
 The cultivation of cotton varieties that have short cropping season
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 The most important method to reduce the impact of cotton disease is to practice
intercropping.
 The application of sanitary measures such as clearing and burning of crop remains
and seed dressing
7.1.4. Cotton Production, Occupational Health and Safety

The most notable negative impact of cotton production is evident when we consider the
condition of laborers at cotton farms. Cotton production practices were known to be
exploitative starting from the era of colonization. The current big American cotton farms
were established initially based on the laborers that were smuggled from Africa in the 18 th
and 19th centuries.
The cotton farming in most parts of the world is becoming mechanized where minimal
labor involvement is needed, particularly in USA and Australia. However, the
production practices in developing countries are still labors intensive although semi
mechanized farms are also there. In developing countries labor is particularly needed in
times of picking. As the survey made in Ethiopian cotton farms show labor is enormously
needed in time of picking. In cotton cultivation practice overloading of workers above
their capacity is common phenomenon.
Other problem in association with cotton production comes when we consider the
application of pesticides. The pesticides which are applied to the cotton farms are said to
affect the human health. They disturb the nervous, endocrine and respiratory systems of
human beings.
7.2. Socio-Economic Impact of Floriculture Production

7.2.1. Positive Impacts
Employment Creation
Cotton farming is one of labor incentive agricultural production activity. Although it
found difficult to get information about employment statistics of the commodity from
secondary sources like Central Statistical Authority, CSA, it is learned from the field visit
76
that a cotton farm that developed 6000 ha can employ about 300 permanent workers and
about 200 casual workers during the picking period. The importance cotton farming
practice in creating employment is not only limited to the farming practice but also to
textile and garment industries too. The expansion of cotton farms increases the
establishment of garment and textile factories, thereby huge employment opportunity
ensured along the value chain.
Foreign Currency Earning

Cotton produce can well be exported to the international market in the form of lint cotton.
For example, in USA cotton is the highest contributor to foreign exchange from all
agricultural products. In Ethiopia too, lint cotton has been one of the source of foreign
exchange. As the scope of the study is confined only up to the raw cotton (it is not
exported in its crude form) the foreign currency contribution is not included.
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GDP Contribution
The production of Cotton contributes to the GDP, increases the income of the workers
employed in and the owners too.
Table 7.1: GDP Contribution

Description 2001/2002 2002/03 2003/04 2004/05 2005/06 2006/07
Industrial Crops 252.87 19266.54 38533.09 99945.20 224455.25 829545.18
All Other Crops GVP 21,452,591 18,105,566 22,599,696 26,991,460 31,060,861 34,598,742
Total GDP 68014176.2 66586887.2 74397096.2 83804022.17 93495148.54 104177126.1
Share of Industrial crops from
the total agricultural GVA 0.0 1.4 1.2 1.1 3.0 2.1
Share of Industrial Crops from
the GDP 0.0 0.0 0.1 0.1 0.2 0.8
Source: MoFED 2000 EC
Linkage Effects
The cotton production will have a magnificent linkage effects in textile value chain. The
flourishing of textile and hence garment industries in the country directly related with the
growth of cotton farming sub sector. On the other hand, the cotton seed which is one of
the produce of raw cotton can be used as an input in about 25 identified industries. Cotton
seeds are particularly important in the production of edible oil, camera, animal feed, and
etc. Supporting of cotton production is encouraging the Agricultural Development Led
Industrialization policy of the country as the produce of cotton used as an input both in
labor intensive industries (textile and garment) which are currently flourishing in
Ethiopia and that of capital intensive industries which would be the natural outgrowth of
labor intensive industries.(the comment is not valid)
Technology and Know Transfer

The cotton production can be undertaken using high tech machineries or manually on
small scale basis. In both ways there are improved technologies which enhance
production and productivity. The improvement in the production of cotton through the
importation of technologies for commercial purpose may have spillover effects to small
scale cotton farmers and to crop farming activities in the country in general.
78
7.2.2. Negative Impacts of Cotton Production
Displacement of local Residents and Destruction of Vegetation
It is repeatedly said that the commercial production of cotton is undertaken in lowland
areas where pastoralist people inhabit. These people are known to lead their life in
rearing of animals. Given the commercialized cotton farms are to be established along the
river banks in search of irrigation waters, it creates two big problems on these societies.
The first is that the establishment of cotton farms along the river banks leads to
competing for fertile lands with local people. And the second is the establishment of
cotton farms along the river banks results in the destruction of vegetations and wild
animals along the river banks. The river banks are usually be the source of pasture for the
pastoralist society during dry period.
Low Employment Opportunity to the Local Society

The experiences show that most of the workers who employed in the cotton farms are not
the local inhabitants; because, people in that area don’t have the culture of farming. Thus,
it is necessary to import workers from other parts of the country. So, the inhabitants may
not sufficiently benefit from the business being undertaken on the land that claimed to be
their own. This beyond upsetting the local residents, it becomes one of the source of
conflict and grievance with the investors working at cotton farms. Development in a
given area will be successful if it benefits the local residents.
Malaria Epidemic
The area where cotton usually grows is known to be the natural habitat for mosquitoes,
the vector of malaria. Given the irrigation of rivers, there would be the construction of
ditches and canals. During off-farming season, if the ditches and the canals were not
properly drained, they would be the home for reproduction of the mosquitoes and hence,
they increase malaria infestation on the local residents.
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8. KEY DRIVERS, SUCCESS FACTORS; PROBLEMS AND
CONSTRAINTS
8.1. Key Drivers
8.1.1. Optimum Climate and Availability of Land
Ethiopia is known to have diversified agro climatic zones which range from a temperate
type climate to tropical climatic zones, which helps to produce different kinds of crops.
The sizable part of the country is low land.
The low land areas in Ethiopia are not only fertile and suitable for most agricultural crops
production but also big rivers which drain from the high land parts of the country pass
through them. They are also characterized by having a plain terrain which is suitable for
commercialized large scale farming. These lands are also found to be cheap to be leased.
8.1.2. Government Policy

The core policy of the Government of Ethiopia, ADLI (Agricultural Development Led
Industrialization) is based on the sector where the country has comparative advantage.
According to the strategy, agricultural sector is not only the sector where the country’s
comparative advantage is the greatest, but also, it is the best and the right way that leads
to the ultimate goal, industrialization.
To this end, for cotton farming sub sector to play its role, the government is supporting it
by all means at its disposal. Beyond leasing cotton state farms for private investors for
efficiency and effectiveness; it has also established agricultural research institutions that
directly involved in providing extension services and research outputs for investors
engaged in cotton production.
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8.1.3. Cheap and Abundant Man Power
The country has easily trainable, cheap and abundant man power. According to the
information gathered during the field visit, most farms satisfy their unskilled labor
requirement in pick seasons by transporting the laborers from the labor abundant areas in
the North and South.
The wage rate paid is very low, which is below a dollar per day. Different universities
and TVET colleges have been training students on agricultural and other related
disciplines which fill the gap on trained man power requirement.
8.1.4. The Establishment of Textile and Garment Factories
Inspired by the government investment policy and well performing macroeconomic
condition in Ethiopia sizable amount of domestic and foreign investors have been
entering the textile and garment manufacturing industries. This would create forward
linkages for the cotton production sector.
8.2. Success Factors

8.2.1. Professional Management
The cotton production activity is becoming more complex in that the experience and
qualification of the management in are very important. Currently the issue of protecting
the environment and the health and safety of workers; and growing quality and standard
requirement of the cotton product needs prudent management.
8.2.2. Selection of Good Variety

The selection of a given variety depends on, among other things, on its yield per hectare,
staple length, fiber strength and etc. The selection and production of a variety that
optimizes such parameters is a key to success on cotton production industry.
8.2.3. Selection of Suitable area for Production

Cotton production is amongst the crops that are highly sensitive to climatic variation.
Hence, before making an investment decision on cotton production, a through analysis of
81
climatic conditions, soil and water taste in the area where investment is planned to be
made is very important.
8.2.4. Availability of Casual Workers

In Ethiopian commercialized cotton farming Industry some activities in production
process are undertaken using man power. As the information gathered during the survey
showed, the availability of casual laborers during the picking time is very important. A
cotton production investor has to be bear in mind before making an investment decision
the availability of casual laborers and the wages to be paid.
3.2.5. The Industry Experience of the Promoters
Before deciding to allocate money on cotton production business the owners are required
to have the knowledge of when does the project start paying them, the specific feature of
cotton production and marketing activities, the qualification and experience of the
management they would deploy, the willingness to accept a reasonable amount of risk
and the importance of working closely with the local residents.
8.3. Constraints and Risk, Major Problems Factors of the

Industry
8.3.1. Major Risks and Constraints
Price risk
In cotton production industries, particularly in developing countries where modern
marketing mechanisms are not well developed farmers usually face price fall. Had it been
derivates like cotton futures markets and options are developed, the cotton producers
would have been hedged against the risk of the fall in price. For, unavailability of such
arrangements cotton producers are obliged to accept a price which below the costs of
production.
Land Tenure System and Local Residents

It is known that the Constitution of the Federal Democratic Republic of Ethiopia shall
pledge land as the property of the government. Although there are pretty reasons for the
82
land to be the property of the government, there are, however, serious problems
concerning land which are hindering private investment particularly in farming activities.
There are no coherent policies and laws concerning land in the country all over the
regions. Particularly, in some cotton production areas (pastoralist areas) land is still
owned communally. This is being the source conflict between the investors and the
pastoralists. There is also no such modern and strong legal system to settle conflicts and
enforce contracts. This is creating a problem of tenure security on the part of the investor.
83
Input Price Escalation
In the production of cotton, the price of inputs like that of pesticides and cotton seed,
spare part, and other over head cost has been increasing magnificently. The price of
cotton seed has been increasing because the price of sulpheric acid which is used to
prepare the cotton seed has been increasing while the price of the pesticides has been
showing an increment due to the volatility of the oil price. On the other hand, the increase
in the price of spare parts of agricultural machineries, and other most important
intermediate inputs is continuously increasing more than the pace in the increase of the
price of the produce.
Subsidy to Developed Country Cotton Farmers

Developed countries are known to subsidize their farmers’ against the low price of
agricultural products. In fact, the subsidy is aimed at encouraging the farmers to stay in
agricultural production rather than shifting to other alternative activities which may have
the least opportunity cost. Unfortunately, the subsidy which is being provided to
developed countries farmers is making the produce of developing countries to be
undersold in the third market.
The agricultural subsidy beyond making developing country farmers earn unfairly low
income for their produce it is becoming the source disincentive to produce more and
making them to live at barely subsistence
8.3.2. Major Problems in Cotton Production Industry

Flooding Problem
It has been said that the cotton farming areas are located in the lowland areas where the
climate and the terrain is found to be optimum for cotton production. Theses areas are
situated in the lower courses of rivers flowing to the lowlands. These rivers usually result
in flooding in there lower courses when unusually high rainfall is occurred in their upper
courses. This problem is common in the Awash and Omo river basins.
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Poor Awareness and Experience, and Labor Turn over
The other very important problem faced by cotton producing firms is that they are not
reaping the benefit from the workers they trained. Most skilled workers are discouraged
by the very low wage they are paid and usually leave the farm after they work for at most
three years and it become difficult to employee a laborer more than a season. This
situation has increased administrative costs of the farms in addition to quality loss.
Tremendous Standard and Quality requirement on the part of the Buyers

The recent development in cotton production sector is that the requirement on the
standard and quality is growing more than any time else, while the producers in Ethiopia
have not such valuable information of it. The problem is as the firms are not yet ready to
produce and pack their produce as per the standard it results in a fall in the price f the
produce.
Growing Problem of Salinity and Increase of Ground Water Table

In the areas where cotton has been growing for more than thirty years the problem is
really becoming evident. Salinity is the accumulation of salts in the soil. This part is well
discussed in environmental section.
Working Capital Shortage

The other major problem observed in cotton production sector is lack sufficient finance in
the cotton value chain. Working capital shortage is the common problem for cotton
producers, ginneries, textile factories and garment manufacturing sub sectors. All the way
each stake holder is facing the problem that each of them sells their produce at low price;
both at the domestic and international markets.
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9. THE MAIN ACTORS OF THE INDUSTRY
9.1. Ministry of Agriculture and Rural Development
The Ministry provides extension services through its extension agents to the investors
engaged in cotton production. These include availing of information on improved cotton
farming practices, training on the conservation of soil and natural vegetation; and the
settlement of disputes which may arise between the local people and the investors in
collaboration with the local authorities. It also promotes researches which would be
undertaken by different institutions on cotton and cotton farming practices. It also works
to wards creating relationship between the domestic producers and other country
producers in collaboration with Ministry of Foreign Affairs.
9.2. Ministry of Water Resources and Development

The Ministry provides professional license and permit to irrigate rivers for investors
which would be engaged in irrigated cotton production. It also regulates the irrigation
waters (around Awash Basin) through its subordinate Authority called Awash Basin
Authority. The regulation of irrigation waters is because; the diverted water is be used by
many farmers along a given primary canal. The maintenance and de-silting of primary
canals in Awash River Basin where irrigation waters are commonalty used is the
provision of the Authority. For all of these provisions the Authority charges price on
cotton farmers.
The amount of water which is to be retained in an irrigated river lower course is regulated
by the Ministry. The Ministry also provides information to cotton farmers concerning the
occurrence of flooding and; particularly in the areas where is common.
9.3. Agricultural Research Institutions

These institutions provide research out puts concerning cotton to the cotton farmers;
provide new varieties of cotton to the farmers, advices to the cotton farmers concerning
best practices in cotton farming; provide information about the proper application of
86
pesticides and fertilizers; and the protection methods of environment. Melka Worer
Agricultural Research Institute is the main to be mentioned here.
9.4. Regional Local Government Institutions

These institutions provide security services to the investors and their workers, as the
farms would be established in the place where pastoralist society dominating and social
unrest is a common feature. Some of the security problems in the area are letting of cattle
damage the cotton plants and raising violence with the investors due to the need of land
to cultivate and/or cattle rearing. It is not only sufficient to work with local officials but
also to settle disputes with local inhabitants even using traditional means as there is
usually no successful modern dispute settling mechanism in pastoralist societies.
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10. OPPORTUNITY AND THREATS OF THE OF FIRMS IN THE
INDUSTRY
10.1. Opportunity and Threats at National Level
Opportunities Threats
 Establishment of new textile and  Inputs price escalation

garment firms in the country;  Erratic weather conditions and
 Abundant and cheap labor ; flooding;
 Low land lease costs  Low return of cotton compared to
 The strong support and incentives other agricultural crops
from the government  The rising of Stalinization in
 Good climatic condition for the irrigated cotton farms
production better quality cotton
 The establishment of agricultural
training institutions for disciplines
10.2. Opportunity and Threats at Global level

Opportunities Threats
 The accession of the country to  The subsidy provided by developed

WTO countries to their farmers
 The rising of cost of production in  The food shortage which may decrease
major cotton producer countries the land allotted to cotton
 The increase in the price of oil and
inputs
 The fall in cotton price ;
 The rising of the issue of environment
as consumers are preferring of organic
cotton
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11. CONCLUSION AND RECOMMENDATION
11.1. Conclusion
Cotton production which was concentrated in Europe and western countries moved to
low cost areas from times of industrial revolution due to the strengthening of labor trade
union movements (which used political pressure to improve workers’ conditions and
therefore increasing the costs of manufacturing) and this pulled the attention of investors
in Europe to invest sister companies in developing countries in the form foreign direct
investment (FDI). The removal of trade quotas and bilateral trade agreement which was
used as a market protection mechanism and the use of free market in January 2005 is a
breakthrough for the sector as it gives equal chance for all producers.
Though Ethiopia has about 2.6 million hectares of land suitable for cotton production the
country was not benefit from this potential to date. The attempt of some individuals to
produce cotton in commercial mode of production during the imperial age was failed due
the confiscation of the cotton farm by Durg regime and fades the interest of private
investors to participate in the cotton development effort of the country. Following the
failure of the Durg regime and the transfer of cotton farm land to local residents resulted
in reduction in area under cotton production and fallowing of the farm land and resulted
in decrease supply of cotton. As a result, most companies in the sector operate under their
capacity, which justifies the need of more cotton farms in Ethiopia.
It is justified that cotton production on irrigated land is more profitable than production
under rain fed conditions which requires river diversion and construction of dams.
Despite all difficulties cotton remain a viable commodity of wealth, employment, and
growth in the world. Demand for cotton increased due to technological changes in
production and its lesser impact on environment. Moreover, consumers prefer natural,
renewable & comfortable products.
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11.2. Recommendation
1. The investors planning to involve in cotton production have to have investment and
work permit from ministry of water resource.
2. In case of river diversion or dam construction, the effect of planned investment on the
lower valley residents has to be evaluated for healthy existence of the farm.
3. The regional governments where cotton farms were planned to be invested have to
formulate land policy that can reserve the rights of investors.
4. The bank has to finance cotton farms following the lending policy set by the bank.
90
12. PARAMETERS, TECHNICAL COEFFICIENTS AND
ASSUMPTIONS
This part of the study is devoted in determining coefficients and parameters. The Case
Team at its disposal designed a questionnaire which is aimed to determine the
parameters. The very important caution which has to be taken by the users of this study is
that the parameters and prices determined are just indicative, that is, they help understand
where the real parameter lay.
12.1. Seedling Requirement

Table 11.1: Seedling requirement of major varieties
Seed Variety Seed rate/ Ha (Kg) Price/qt Remark
Delta Pine-90(DP-90) 18 1030 It applies only for chemical (acid)
delineated seeds
Acala SJ-2 18 1030 It applies only for chemical
delineated (acid) seeds
Source :( Survey; May 2009)
12.2. Yield
Table 11.2: Yield of different cotton varieties
Sr. No Seed Variety Yield/Ha (Qt) (Raw cotton)
1 Delta Pine-90(DP-90) 39.4
2 Acala SJ-2 32.6
Source: Ethiopian Agricultural Research Organization, 2004
12.3. Processing of Raw Cotton

Table 11.3: The out put of raw cotton processing
Sr. Out Put Mass Share from the total Value
No Raw cotton share
1 Lint Cotton(fiber) 34% 90%
2 Cotton Seed 66% 10%
12.4. Price of Raw cotton

Average price of raw cotton per Qt is Birr 400.00. (Source: Survey, May 2009)
91
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12.5. Investment Costs
12.5.1. Farm Establishment Costs
Table 11.4: Labor and Machinery (For a New Farm)
Description Mode of Rating Unit/ha. (DH/ha, GRH/ha or MD/ha)
Production
Slashing Dozer 8
Burning labor 9
Uprooting Dozer 10
Dyke and Canal Construction Dozer 2.5
Access Road Construction Grader 50
In –farm Road Construction Grader 30
Parceling Excavator 1
Plowing (Virgin Land) Tractor 4
Field Sanitation Labor 8
Source: Survey May 2009
Note that in the land clearing phase of establishing cotton farms heavy machineries like
bulldozer and grader might be used, where the rate of usage depends on the terrain and
the density and type of vegetation of the land to be cultivated. These machineries are
usually rented. The service charge per hour is determined by the renters in the vicinity of
the farm.
12.5.2. Materials Requirement

Irrigation Equipments
Most sampled cotton farms currently operating in Ethiopian use furrow irrigation system
by diverting annual rivers following from the highland areas of the county. The most
important equipment used here is siphon. Siphon is a tool that is used to help water pour
without the impediments of gravity. For seven hectares of land a siphon with 2.5 inches
and the smaller other seven siphons with 1.5 inches are necessary.
93
The other very important irrigation equipment is shovel, where 7 shovels per hectare are
recommended. In the areas where water could not be available through gravity, water
pumps are used. A water pump required for 500 hectares should have a discharge
capacity of 400ltr/second.
12.5.3. Agricultural Machineries and Equipments

The following are the major agricultural machineries and equipments.
Tractor, Rotavator (slasher), Plough, Disk Harrow, Leveler, Ridger, Planter, Cultivator,
Ditcher, Trailer, Water Pump, and Generators
12.5.4. Service Vehicles

Table 11.5: Service Vehicles required for 5000 hectare holdings
Sr. No. Type of Vehicles No
1 Station Wagon 1
2 Double Cabin Cars 3
3 Mid Bus 1
4 Cargo Truck 1
5 Motor Bikes 20
Source: Badhamo Agricultural Development Enterprise; May 2009
12.5.5. Others Machineries to be rented

Table 11.6: Heavy duty machineries Requirement; Source: Badhamo Agricultural
Development Enterprise; May 2009
Sr. Type of agricultural Unit of Price per Remark
No. machinery measurement Unit
Air Plane for spraying Transportation Cost of the air plane (Birr
1 ULV Applicant Ha. 88 4050.00/hr) is covered by the cotton producing
EC Ha. 126 firm while fuel and per diem allowance for the
Herbicide applicant Ha. 183 Pilot is covered the owners of the air plane.
The air plane can be outsourced from Ambira
Agricultural Development or From Sudan.
2 Dozers Hr. 478.23 Transportation cost of the machineries, fuel
3 Graders Hr. 347.74 and the per diem of the operators of the
4 Excavator Hr. 478.23 machineries is covered by of the owners of the
5 Loader Hr. 370.00 machineries
Source: Badhamo Agricultural Development Enterprise; May 2009
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12.5.6.Furniture and Fixture
The following are some of the major furniture and fixtures.
Computers, Satellite Equipments, Swivel Chair, Chairs, Tables, File Cabinets, Fax,
Machines, Printers, Photo Copier, Trash Basket, and Shelves.
1.5.7. Building and Construction
- Irrigation Canal Constructions and including the wells for potable water
- Office Buildings
- Resident Buildings
- Workshops
- Stores for inputs, spare parts, and the produce
- Satellite Camp
- Clinic buildings
12.6. Operating Costs
12.6.1. Machine Operation
Table 11.7: Machine Hour Requirement
Description Frequency TH/Ha
Plowing 1 3
Disking 1.5 0.89
Leveling 1 0.82
Pre-Plant Cultivation 1 0.98
Ridging and Furrowing 3 2.5
Planting 1 0.91
Post Plant Cultivation 1 0.52
Produce Transport 1 0.75
Input transport 1 0.50
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12.6.2. Direct Labor Cost
Table 11.8: Direct labor requirements
Description Frequency MD/ha
Uprooting and Trash Disposal 1 12.22

Field Sanitation 2 6.00
Canal Cleaning 10 Canal Cleaning - -
20 Canal Cleaning 1 0.05
30 Canal Cleaning 1 0.05
Canal Maintenance 10 Canal Maintenance 1 -
20 Canal Maintenance 1 0.33
30 Canal Maintenance 1 0.20
0
Canal De-silting 3 Canal Maintenance 1 0.10
Input Transportation 1 2.00
Irrigation Pre-plant Irrigation 1 2.00
Showering Irrigation 1 1.00
Plant Irrigation 5.5 3.67
Irrigation Controller 1 1.99
Gapping 1 4.17
Headland Planting 1 3.50
Weeding 5.3 7.97
Thinning 1 4.51
Seed Supervision 1 0.39
Pesticide Application 1 3.50
Plant Erecting 2 1.00
Chemical Mixers and Flag Men 1 0.37
Cotton Picking Picking1st 1 2.00
Picking 2nd 1 5.00
Bagging 1 0.05
Loading 1 1.00
Field Canal Closing and Ring Opening 1 0.02
Source: New Project Specific Study, 2007; and Survey May 2009
12.6.3. Fuel Cost

Vehicles, generators and water pumps are the major machineries and equipments that are
used in irrigated cotton farm.
Fuel Cost of Tractor
96
The consumption rate of fuel by the tractor is determined based the horse power and the
origin of manufacturing. For tractors less than or equal to 80HP, 0.115lt/hr-HP and for all
other tractors above 80HP, 0.125lt/hr-HP can be used for the calculation of the fuel cost.
A tractor can serve on overage about 100 hectares. On other hand the cost of oil
consumption can be taken as 2% of the cost of fuel consumption. The grease
consumption is taken to be 15gm/hr.
Fuel Cost of service vehicles

A service vehicle is assumed to cover a distance of 20,000 KMs per year. The fuel cost is
then calculated based the specification made by the manufacturers. The cost of oil and
grease can be calculated in the same way to that of tractor.
Fuel cost of Motor Bicycle

A motor Bicycle is assumed to cover a distance of ----- KMs per year. The fuel cost is
then calculated based the specification made by the manufacturers. The cost of oil and
grease can be calculated in the same way as that of tractor and service vehicles
Fuel Cost of Generators

Generator is employed in time when there is electricity interruption and/or in areas where
there is no supply of electricity from Ethiopian Electric Power Corporation and a
generator can serve unit farm.
Fuel Cost of Water Pumps

Water pumps are used when water cannot flow with gravity and a 90 HP water pump can
serve about 100 hectares. The fuel requirement could be taken from the manufacturer’s
specification.
11.7. Over Head Costs

11.7.1. Utilities and Supplies
Most of the farms currently operating in Ethiopia are located in the peripheral parts of the
Country where Ethiopian Electric power corporation (ELPA) services are not available.
97
In those areas Generator is the only option. At least two generators per farm are
recommended.
In Middle Awash Cotton Farms where the service of ELPA is available the Cost of
eclectic charge/ha is estimated to be birr 160per year per ha. Cotton Farms have to be
also supplied with potable water. Most of the cotton farms currently operating in the
country acquire potable water from the ground water source. The cost of tell, post and
other supplies is calculated to be Birr 13/ha.
11.7.2. Freight for the Product

The product transportation could be undertaken in two ways. The first is transporting of
the produce from the farm area to the ginneries (If the farm has its own ginnery); and is
usually undertaken by tractor. In this case transportation service is outsourced only for
transporting of the produce to the port (given the produce is exported) as the arrangement
of the market with importers is found to be on CIF bases (Survey, May 2009). If the
produce is intended to be sold in the domestic market no transportation cost is to be
calculated as the current experience at surveyed farms show, the buyers usually transport
the produce from the farm site to their own destination.
On the other hand, if the cotton farm has no ginnery the transportation cost can be
calculated as the sum of the cost of transportation from the farm cite to the ginnery plus
the cost of transportation from the ginning site to the store. The other steps then follow
the same with the first case.
11.7.3. Harvesting and Bagging Materials

The most common type of packing materials used by cotton farms are the hessian cloth
and the bailing wire. Five meters of hessian cloth are enough to pack a bale of cotton.
The price per meter of the hessian cloth is Br 6.90. Five pc of bailing wire are enough to
pack a bale. The price per pc is birr 3.85.
Picking sacks/ bags or are also used during the time of harvest. Its number depends on the
number of pickers and a picker hold a pc. A pc of picking material can hold as much as
98
45kg and its price is Birr 6.00 per pc. The harvested cottoned is then put on trailer to the
ware house. Before it enters the ware house it put in to collecting sacks which can carry
about 90kg. The price of collecting sacks is Birr 27.00 per pc. Then after the produce is
stored in ware house before it is ginned. After it is ginned it is packed in to a bale.
11.7.4. Fertilizers and Chemicals

11.7.4.1. Fertilizers
Fertilizer application should be based on the soil fertility status report to full fill the
deficiency. In general the following application rate is recommended.
Table 11.9: Fertilizers Usage

Fertilizer Types Application rates (Kg/ha) in
Concentration different soil fertility status
(%) Good Medium Poor
Nitrogen Ammonium 20 200 300 400
Sulphate
Urea 46 100 150 200
Phosphorus Super phosphate: 16 100 300 400
Ordinary or
(25:5:5)
Double Super 38 100 150 200
phosphate
Triple Super 46 100 150 200
phosphate
Potash K2O 50 50 - -
Source: Project Supporting Data (P.S.D.1), DBE
It has to be noted that most commercialized cotton farms in Ethiopia have not yet started
using of fertilizers. The only fertilizer that is being used in the last two years by some
cotton farms is urea. Its price per Qt is found to be Birr 549.00. Urea is applied only once
in a given crop season.
11.7.4.2. Chemicals
Table 11.10 Chemicals and the application rate
Sr. No Description Rate/ha (Lt) Frequency Price
1 Marshal 1.5 2 92.00
99
2 Endosulphan 2.5 2 40.00
3 Tiodane 1.5 2 -
4 Karatel 1.5 2 -
5 Curacraone 1.5 2 -
7 Talstar 2.5 1 70.00
8 Bestox 3 1 46.00
9 Fastac 3 1 68.00
Source: Project Supporting Data (P.S.D.1), DBE and Survey (May, 2009)
100
11.7.5. Travel and Per diem
Travel and per diem has to be manipulated that the farm manager and the department
heads make a travel 4 times a year from the farm site to project head office (Which is
usually found to be Addis Ababa).
11.7.6. Insurance: It would be 0.75% of the fixed assets.

11.7.7. Repair and Maintenance:
a. Building and Construction: 3% of original cost
b. Machinery & Equipment:
Table 11.11: Repair and Maintenance
Sr. Description Repair and Maintenance (in percentage
No. of original Cost)
1 Tractor 13
2 Rotavator(slasher) 8
3 Plough 8
4 Disk Harrow 8
5 leveler 5
6 Ridger 5
7 Planter 8
8 Cultivator 5
9 Ditcher 5
10 Trailer 8
 Furniture and Fixture: 12% of original cost

 Vehicles: 20% of original cost
 Generator: 10% of original cost
 Water Pump: 10% of original cost
101
11.7.8. Depreciation and Amortization
 Building and Construction : 5% of original its cost
 Machinery & Equipment : 12% of original its cost
 Furniture and Fixture: : 10% of original its cost
 Cost of Vehicle : : 20% of original its cost
 Generator: : 20% of original its cost
 Water Pump: : 20% of original its cost
11.7.9. Leas Cost

Refer to land lease agreement between the project and concerned office from where the
land would be availed.
11.7.10. Working Capital Requirement

Based on the above operational cost analysis the working capital requirement
determined for the following months.
Description Period (Months)
Salary and Wages Annual cost
Inputs Annual cost
Freight Charge Annual cost
Packing Material Annual cost
Energy Consumption Annual cost
Fuel and Lubricant Annual cost
Insurance Annual cost
Stationery and P.T.T Annual cost
Travel and per diem Annual cost
Electric Bill Annual cost
102
Reference
 Dr Ancy Thomas, “Organic Cotton Production and Products; A Challenge in the
Global Economy “, Textile Engineering Department, Bahirdar University
 EARI, “Cotton Production Guideline”, Addis Ababa
 Ikisan.com 2000, “Cotton Management”, Nagariuna Fertilizers and Chemical
Limited, India
 Regrient and Roberts (1999), “Recognition and management of pesticide poising”,
USA
 Ethiopian Agricultural Research Organization (2004), “Directory of Released Crop
Varieties and their Recommended Cultural Practices”, Addis Ababa.
 US Department of Agriculture(November ,2008 ), “Cotton and Wool Situation and
Out Look Year Book”, USA
 Agridev Consultant (2003), “Cotton- Textile- Apparel Value Chain in Ethiopia”,
Nairobi Kenya.
 Keith S. Mayberry (2000), “U.C Cooperative Extension Sample Cost to Establish and
Produce”, USA
 Eyob Demise and et el (January,2005) ; “Fruit of the Loom Export Potential of
Ethiopian Handmade Household and Home Furnishing Textiles”, Rotterdam
 Gerard Oonk (2008); “Child Labour, Trade Relations and Corporate Social
Responsibility”, the Netherlands
 National Cotton Council of America (May 2008), “Cotton Market Report”, USA
 B. Gangaiah (2002), “Agronomy of Cotton”, New Delhi
 Michele C. Marra (2007), “Important Innovations in Cotton Production”, North
Carolina State University , USA
 John Ganzi (2006), “Sustainable Agriculture, Corporate Social Responsibility and the
Private Sector of the Financial Services Industry”, USA.
 International Cotton Advisory Committee, “Series of Reports”, Washington DC.
 Abdelrahman Babiker (2008), “Sudan Cotton Research and Production Scenarios,
Challenges Achievements and Prospects”
 Blake. Bennett (2008), “Introduction to Cotton Options and Futures”, Taxes USA
103
 Development Bank of Ethiopia Agricultural Department (2007), “Parameters,
Technical Coefficients, and other project Supporting Data for Agricultural Project
Study”, Addis Ababa
 Zewde Bishaw, et.al. (2008), “The Status of the Ethiopian seed industry”,
Wageningen International
 Edward M. Barnes and Patricia F. O'Leary, “Water Management”, Agricultural
Research Division, Greenville
 USDA
 Foreign Agricultural Service/USDA Office of Global Analysis
 Privatization and Public Enterprises Authority.
 MOTI and case team manipulation
 MOA&RD & www.icac.org.
 May 2009, Africa cotton farm in middle Awash.
 World Bank, “Cotton in the Global Context: Discussion Paper for the Governments
of Central Asia”.
 Cotton: Facts and general information from swicofil.
 Cotton from field fiber to fabrics.
 2009/10; International cotton advisory committee.
104
Annex I
Table1.1: Surveyed Cotton Farms and Responses for the Questionnaires
Sr. No. Name cotton Farms Level of Data
Collected
1 North Omo Agricultural Full
Development Enterprise
2 Omo Valley Agricultural Full
3 Middle Awash Agricultural Full
4 Badhamo Agricultural Full
5 Africa Agricultural Full
6 Abaya Agricultural Full
7
8
105
Annex II
Questionnaire on cotton plantation
1. Name of the farm:_________________
2. Total land Holding:________________
3. Total developed hectare:_____________
4. State the major raw materials /inputs/ used in your farm and their sources
a. Seed cotton
Sources Frequency Price/
Seed Variety Rate/ha Growing period
Domestic Import Of application Unit
b. Pesticides
i. Insecticides
Sources Frequency Timing of
Type of Chemical Rate/ha Price/Unit
Domestic Import Of application Application
ii. Herbicides
Sources Frequency Timing of
Type of Chemicals Rate/ha Price/Unit
Domestic Import Of application Application
iii. Fungicides
Sources Frequency Timing
Type of chemicals Rate/ha Price/Unit
Domestic Import Of application Of Application
c. Other Pesticides/Chemicals
Type of chemicals Rate/ha Price/Unit
Domestic Import Of application Of Application
106
d. Fertilizers
Type of fertilizers Rate/ha Price/Unit
Domestic Import of application of Application
e. Packing Materials (Wrapping tape, pallet, sacks, bondage…)

Type of Packing Sources Requirement
Price/Unit Remark
materials Domestic Import Per bale
5. Commonly prevailing insects, weeds and diseases in the area and the corresponding
pesticides recommended
Application
Pests Name of pest Pesticides used Application rate
Frequency
Insects
Weeds
Diseases
6. Sales price trend
Year Sales volume Sales value/kg Remark

(kg)
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
107
7. List of cotton farm operation sequentially and their important parameters
a. Land development Activities (clearing, trash removable, etc,)
Land Frequency Mode of Model Rating Unit Amount

Cost
development of the Production (for (MD/ha, TH/ha, required
per unit
Activities operation (Labor/Machinery) Machinery) etc) per unit
b. Operational Activities
Frequency Mode of Model Rating Unit Amount
Operational Cost
of the Production (for (MD/ha, TH/ha, required
Activities per unit
operation (Labor/Machinery) Machinery) etc) per unit
8. What type of irrigation system is used at your farm? Please tick

a. Drip
b. Sprinkling
c. Flooding
d. Others (Please write) ______________
9. Irrigation Equipments and Machineries used

Type of Irrigation Machinery or Equipment Model Quantity Out put/unit Price /Unit
10. List of vehicles which are used at your company

Type of Vehicle Model Quantity Purpose Price/Unit
108
11. Furniture and Fixtures
Type of Furniture or Fixture Quantity Price/Unit Remark
12. Annual consumption of Utilities

a. Source of electrical power ____________________
b. Source of potable water ______________________
c. Annual utility expenditure
Description Consumption/year (in Birr)
Power Consumption
Telephone
Water
Office Supplies
Telephone, post and internet service
If any other, please list down
13. Is your farm is insured? _______. If your answer is yes, please list down your
insurance coverage ________________
14. Manpower Requirement (Permanent Workers)

Minimum Requirement Salary Workers benefits
No.
Scale Allowan
Job Position require Qualificati Experienc Medicatio Accommodatio Unifor
(in ce
d on e n (%) n m
Birr) (Birr/%)
109
Interview on cotton plantation
1. What are your selection criteria for purchasing seed cotton varieties?
_________________________________________________________________________________
_________________________________________________________________________________
______________________________________________________
2. Are there any recommended grades of pesticides for cotton plantation and its justification?
_________________________________________________________________________________
_________________________________________________________________________________
______________________________________________________
3. Unique characteristics/features/ of cotton pesticides/fertilizers used for cotton plants?
a. Foliage Fertilizer
b. Solid fertilizer
c. Liquid Fertilizer
d. Others ____________________________
4. Marketing arrangements for raw material
a. Purchasing chain of raw material (Local & Import)
i. Directly from producers or suppliers or indirect (Brokers)
ii. Purchasing arrangements with sellers (direct sell, credit & etc)
iii. Point of ownership transfer
 At sellers farm gate, or
 At buyers destination
b. Related costs (Tax, charges, etc)
________________________________________________________________________
______________________________________________________
5. Constraints in raw materials procurement and mitigating measures
a. Cotton seed
___________________________________________________________________________
___________________________________________________
b. Pesticides
___________________________________________________________________________
___________________________________________________
c. Packing Materials
d. Others raw materials/inputs/

___________________________________________________________________________
___________________________________________________
110
6. Description and flow of cotton supply chain for local market
_________________________________________________________________________________
_________________________________________________________________________________
_________________________________________________________________________________
_________________________________
7. Description and flow of Cotton supply chain for export market

_________________________________________________________________________________
_________________________________________________________________________________
______________________________________________________
8. What are current market constraints of cotton sector?
_________________________________________________________________________________
_________________________________________________________________________________
______________________________________________________
9. Marketing arrangements for raw material
a. Selling chain of raw cotton/ lint cotton (Local & Import)
i. Directly to buyers or indirect through brokers
ii. Selling arrangements with buyers (direct sell, credit, transportation
arrangement & etc)
iii. Point of ownership transfer
 At sellers farm gate, or
 At buyers destination
b. Related costs (Tax, charges, etc)
________________________________________________________________________
______________________________________________________
10. Ginning cost of the raw cotton per bale __________
11. Building and Construction
Type of Buildings or Construction Recommendable size No.
12. Problems concerning the availability of labor force; and strategies to mitigate such problems
12.1. Skilled Labor
111
12.2. Unskilled Labor
13. Environmental Situation of the Farm and Social and Safety of workers
13.1. What are the possible wastes of your farm? List if there are any.(Liquid wastes, solid wastes
and air emissions)
13.2. Protection mechanisms of the environment from these wastes?
13.3 . Safety precautions which are provided by your farm to different operations?
13.4. Does unionization of workers at your farm has a legal background?
14. Are there standardized incentive schemes at your farm?
15. Success Factors and Major Problems

15.4. List the name of the government institutions, NGOS, Business organizations, Agricultural
Research Organizations and/or Agricultural Organizations that directly or indirectly interface
with your operation and describe major supports you receive from the above institutions?
Please, discuss each separately.
15.5. Is your organization is performing according to the plan? Yes/No
112
15.5.1. Major Reasons
15.5.2. What were your efforts you had been exerting to mitigate such problems?
16. Do you have such a bright prospect for you company?
Questionnaire on cotton plantation for Ministry of Agriculture

1. Statistical data regarding requirement of fertilizers and pesticides of the country and import
amount
a. Annual requirement of the country
Year Fertilizer Pesticides
(EC) DAF Urea Others Herbicides Insecticides Fungicides
1996
1997
1998
1999
2000
b. Annual import to the country
1996
1997
1998
1999
2000
2. Statistical data regarding requirement of fertilizers and pesticides of the country and import
amount for cotton plant
113
a. Annual requirement of the country
1996
1997
1998
1999
2000
c. Annual import to the country
1996
1997
1998
1999
2000
3. Area under production of cotton and annual yield
Year Area under Total yield in Remark
cultivation (ha) kg
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
114
Questionnaire on cotton plantation for Ethiopian Seed Enterprise
1. Cotton seed producing farms in the country
Ownership Total Mode of Watering
Production
Seed varieties (States/ Private/ Land (Irrigation/ Rain Price/Unit
capacity
Peasant) Holding fed)
2. Cotton seed annual production ( Private & Public cotton seed production )
Year
Description
2004 2005 2006 2007 2008
Cotton seed (Qt.)
Production Area (ha)
115

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Development Bank of Ethiopia

COTTON COMMODITY Study

Prepared by: Case Team 3

1.3. Methodology of the Study

1.4. The Scope of the Study

a. Conventional (also known as traditional or commercial)

Table 2.2: Uniformity standard

 Improved cotton seed

 Utilities (water, electrical energy ,fuel and others)

 Other auxiliary materials

Table 3.1 sources of major inputs

Source: Research survey, 2009

o High Productivities /best yield/

o Adaptability of the crop

3.1.1 Sources of raw materials

Table:-3.2 sources of improved cottonseed

Description Domestic Import

Source: Research Survey, 2009

For irrigated areas

Middle Awash &

Middle Awash &

130-140 Not Under Middle Awash &

Carolina 130-140 Not Under Arbaminch , Upper

Stonevilla- Not Under

Table:-3.4 Area under cotton cultivation & seed requirement

Year Areas under cotton (ha) Seed/ha Seed requirement % change

Year Projected area under cotton Annual requirement (In kg)

2009/10 137,233 2,744,668

2011/12 142,723 2,854,455

2012/13 148,432 2,968,633

2013/14 154,369 3,087,378

2014/15 160,544 3,210,874

2015/16 166,965 3,339,308

B) Supply of cotton seed

Table: - 3.6. Annual cottonseed sales by the Ethiopian seed Enterprise

Regions 2004/05 2005/06 2006/07 2007/08 2008/09

Amhara 1952 - - - 9.96

Tigray 250 - 238 - -

Total 5671 4 238 - 60.96

3.1.4 Constraints of cotton seed

3.2 Pesticides and Fertilizers

Table 3.7-Sources of Pesticides

Description Domestic Import

Source: Research survey, 2009

B) Major suppliers of pesticides in Ethiopia

No. Suppliers Insecticides Herbicides Rodenticides Miticides

1 Filbert & Company African bollworm -

2 Chemtex private - Grass weeds

3 Fs Pvt.comapany African bollworm, Storage & field For plant

5 HEART P.L.C African bollworm & leaf - - -

6 General & Trading African bollworm - - Red spider

7 Makoba Enterprise African bollworm - -

8 Lions International African bollworm - - -

9 Adami- Tulu African bollworm - - -

10 Tadi Zerhin - - Field rats as a -

Sources: Animal & Plant health regulatory directorate (MoRAD)

Table 3.9 Sources of fertilizers in cotton farms

Description Domestic Import

Year Dap Urea Total

2003 157955 106394 264349

2004 210838 112101 322939

2005 2248119 121735 346554

2006 251156 124561 375717

2007 259020 129121 388141