By Dan McDougall

The musky scent of cheap patchouli rises from a cracked clay incense burner in the tiny courtyard of Shaban Abdulal Zarhel's decrepit mud and brick home. In the corner, next to the scraggly livestock, his wife, clad from head to toe in a sombre black burka, squats on the floor, smearing the deepest indigo dye on her youngest son's forehead. Alongside, her four other children

sleep off their relentless morning labour in the fields. By 2pm, after a meagre meal of rice and flatbread, they will return to the boiling heat of the meadows.

'Indigo has been used to ward off harm to male children since early Islam,' my translator, Said, tells me without prompting. 'It is a Bedouin tradition adopted by the Arabs.' Here in the Fayoum oasis, 90km south across the Sahara from Cairo, fear of the evil eye, like locusts and drought, is a constant in people's lives . 'They call the evil eye "ayn",' Said continues. 'Protecting the boys, the next generation of workers, is the most important

thing for these families.'

Assembled on the ground next to the family stove are amulets, charms and talismans engraved with Koranic script. Shaban Abdulal's wife is pregnant. They are hoping for another boy. Outside, the couple's eldest son, one of four boys, erects a barricade of tightly woven palm branches, known as tabia, to keep the wind-blown sand out of the family home. We have been with the family since the fi rst light crept out of the great desert and into the cotton fields that surround Zawyat Al Kardsha, the farming community in the oasis that they call home. Looping down from the chaos of the capital and linked by road, Egypt's crescent-shaped chain of five oases – Fayoum, Bahariya, Farafra, Dakhla and Kharga – have provided refuge and safety for two millennia. Like hundreds of thousands of other people across the Nile Valley, Shaban Abdulal and his family are bonded to their fields.

Slumped next to his mother, Shaban's youngest son, seven-year-old Abdul Rachman, looks exhausted. Drenched in sweat and dirt, with holes in his shoes and trousers, his face is a picture of misery and suffering. 'It is my job to take the worms off the cotton leaves,' he tells me, his voice a whimper of embarrassment and nerves. 'But it is hard. The worms that eat the cotton are difficult to spot and the earth is dry and dusty. I feel sick in the heat but I must work. My family needs bread.'

For the children here, education is a luxury their parents cannot afford. Instead their days are regulated by the harvests: radishes in winter, onions in spring, and Egyptian cotton in summer and autumn. In the next month the fields that cling to the banks of the Nile will be full of children working the cotton for up to 10 hours a day. Perhaps most alarming is the nature of

their work – removing the bollworm, the cotton farmers' nemesis, and handling plants drenched in pesticides. Accurate health studies are thin on the ground here, but many of the children complain of breathing difficulties at the height of summer.

Drive across Egypt and you will see children working everywhere. In rural street cafes they serve tea to farmers, on building sites they carry heavy limestone bricks. Though the issue has traditionally been ignored, the focus on their plight has grown in recent years. Today, an estimated 2.7m children work across the country, the majority in agriculture, with more than 1m hired each year for the cotton harvest, during which they work long hours in 40C heat. Increasingly, though, there is no school time in between. In a recent Unicef survey, nearly all children asked reported beatings by foremen in the fields.

According to most NGOs, eradicating child labour in agriculture in Egypt would be impossible, as it is traditionally an issue between families. But our investigation in the Nile Valley has found that the children are more likely to be victims of modern-day gangmasters, who recruit them from impoverished families to work the fields from dawn until dusk.

In the west, Egyptian cotton has become a byword for luxury. No five-star hotel in central London or downtown Manhattan is complete without starched white sheets from the Nile Valley on its beds. Marks & Spencer, John Lewis, Habitat, Ikea, even Tesco now carry luxury Egyptian cotton ranges. Then there are the ubiquitous Egyptian cotton towels. In Britain alone the cotton

business, from sheets to high street clothing, is worth billions.

Cotton has a long and chequered history. It may have existed in Egypt as early as 12,000BC, and thanks to rich soil and an ideal climate, it has been successfully cultivated in the Nile Delta to make fabrics for at least 7,000 years. Arab merchants brought cotton cloth to Europe about 800AD. When Columbus arrived on the American continent in 1492, he found cotton growing in the Bahamas. It reached England two centuries later.

Cotton is actually two crops: fibre and seed. Around two-thirds of the harvested crop is composed of the seed, which is crushed to separate its three products: oil, meal and hulls. Cottonseed oil is a common component of many foods, used primarily as a cooking oil or salad dressing. The oil is used extensively in the preparation of such snacks as crackers and digestive biscuits. Limited quantities also go into soaps, pharmaceuticals, cosmetics, textile finishes and other products. The meal and hulls are used as livestock, poultry and fish feed, and as fertiliser.

Even after 7,000 years, cotton remains our most adaptable and widely used fibre. From all types of clothing to spacesuits, banknotes, linen, tarpaulins and tents, cotton is the single best-selling fibre in the world. Today, in terms of production, China, the US, India, Pakistan and Brazil are the world leaders, but in terms of prestige nothing comes close to Egyptian cotton. It is renowned for producing fibres of uniform length, which are stronger, finer and have greater elasticity than any other fibre. The US and the UK are Egypt's biggest customers, but India, once a major client, stopped importing in the Seventies, when it attained self-sufficiency. India now grows and exports its own 'Egyptian cotton'.

Egypt's cotton exports are worth £150m, a business that should be securing the livelihoods of the farmers. Instead, Egypt is a nation of thousands of Shaban Abdulals, trying to survive amid inflation, corruption, dwindling water resources, high fuel prices and a government that has yet to ease their burden. Now, the farmers feel besieged on all sides. Their decrepit irrigation

systems, which pump waters from the increasingly depleted Nile, are rusting. The cost of seeds and fertiliser has soared. Many pay rich landowners ever higher rents for the right to work their modest lands. Those who own their own simple farms end up with smaller and smaller plots as each generation's inheritance subdivides farms among several sons.

Only 15 years ago, Shaban Abdulal Zarhel considered himself one of the developing world's great success stories. From the depths of poverty, on farm-labour earnings of 20p a day, he had grouped together with his neighbours to take on a loan and purchase a hectare of fertile land in the sun-baked heart of the Fayoum oasis. It cost the equivalent of £200. Like countless other farmers across Egypt, Shaban Abdulal and his friends

planted the land with hybrid cotton seeds, joining the tail-end of the country's agricultural evolution, growing a high-yield cash crop destined for world markets. The cotton seeds, unofficially supplied by a western agricultural giant, were initially a success, but the amount of cotton they were able to produce kept falling.

Last summer, Shaban Abdulal spent £150 on cotton seeds and fertiliser, and in the autumn he sold his cotton for £200, leaving him £50 for the year. His other brother, who grows figs, gave him enough money to feed the children for the winter. This year promises worse to come. He tells me the biggest victims of the crisis are his children and his neighbours' children, who, instead of going to school, now work the fields, on his own smallholding and that of other landowners.

'How do we find ourselves in this position?' he laments, as we sip weak black tea in the shade of his one-room house. 'When my father was a cotton farmer it didn't cost anything to grow his crops. You'd use the seeds from the previous year's crop, and your cow's manure for fertiliser. If you had a bad crop, you'd eat poorly for the year, but you'd be able to start again the next year. Now we have become dependent on these seeds and the labour

of our own families. I can no longer send my children to school;

they must work here in the fields with me.'

Walking across the cotton farmers' pathetic patch of land we find half a dozen children crawling on their knees through the undergrowth, like field mice. It is early in the growing season and their vital role is to remove tiny insects and worms that threaten the cotton plants. Standing waist-high in the cotton

of an adjacent field, Ahmed Khaled casts nervous glances back towards his foreman. At 10 years old he is a 'veteran' of the fields. His day begins at 6am harvesting onions, a reliable year-round crop; the hardest part of the day comes when he enters the cotton fields, by 8am. 'We work up to eight hours a day,' he says. 'This is the hardest time, keeping the cotton safe when the sun is at its hottest. The harvest is easier – the hours are hard but the weather is cooler.' The youngster shows me his calloused hands, the dirt ingrained in his palm. 'I cannot read or write,' Ahmed says. 'We go to school when we can, but we cannot afford to. School is for rich children.'

According to Hamdi Wabid, a campaigner for the Land Centre for Human Rights, an NGO that fights for cotton farmers, the Egyptian cotton we sleep on in the west comes at the end of a chain of hardship and suffering. 'Counting seeds and fertiliser, the cost of starting each year's crop has jumped from zero to hundreds of pounds,' Wabid says. 'At the same time,

cotton prices have plunged, mainly because of oversupply but also because the US, the world's largest cotton producer, provides generous government subsidies to its farmers, allowing them to sell at a far lower cost. This has led many in Egypt to blame the Americans for creating the crisis,' says Wabid.

'Those who are suffering more are the children. You can be assured that any Egyptian cotton you buy in Britain has been picked or processed or tilled by children, some as young as five and six. They have no opportunities to thrive or grow, or even, as children, to have dreams and ambitions.'

Two years ago, President Mubarak's wife, Suzanne, took part in the International Labour Organisation's 'Red Card to Child Labour' campaign during the African Football Cup of Nations, which Egypt hosted. But the problem remains: how can child labour be abolished in such an unregulated environment? While the Egypt Child Law of 1996 bans the employment of

children under 14, and regulates the hours and conditions of those between 15 and 17, it remains largely unenforced. More importantly, it does nothing to address the root causes propelling youngsters into this line of work.

The essential reason, as in India and Bangladesh, where child labour is also rife, is poverty. According to the UN 2005 Egypt Common Country Assessment, almost 17 per cent of Egypt's 77.5m people were living below the poverty line in 2007. The situation is much worse in Upper Egypt, especially in rural areas where the cotton fields lie.

According to Juliette Williams, spokeswoman for the campaigning British charity Environmental Justice Foundation, which has investigated the cotton industry across the world, 'Egyptian cotton is synonymous with luxury, yet the reality behind its production is endemic child labour – up to 1m children are working in the cotton fields each year. This is a scandal the companies need to address. Yet when we have pressed companies on their supply chains many tend to fudge the issue, and simply say they require their suppliers to meet certain standards within the factories that produce clothing.

This misses the point. Companies need to get out of the factories and look to the fields. I think they, like us, would be horrified at what The Observer has found.'

'The whole cotton supply chain, unless you choose reputable organic or fairtrade, is so murky, ' she adds. 'The irony is that Egyptian cotton is the only cotton that is sold with the country of origin as a selling point, as top-of-

the range quality, yet the luxury bedsheets we buy may well be linked to entrenched poverty and rampant child labour. '

When we contacted high street retailers of Egyptian cotton they responded that as far as they're aware their products are child-labour free. M&S said, 'We're currently working towards all of our cotton being sourced in line

with the principles of the independent Better Cotton Initiative, which is driving change globally and is setting new social and environmental standards for commodity cotton.

It went on to cite how it had banned cotton from Uzbekistan due to concerns about child labour. John Lewis, probably the retailer most synonymous with Egyptian cotton, said it does not '...source cotton directly from Egypt. All of our Egyptian cotton bedding range is sourced from a supplier in the Middle East.' It also said that this supplier was on the Sedex (Supplier Ethical

Data Exchange) database.

Last month, as Haiti burned in the midst of food riots, little attention was paid to similar disturbances in Cairo. At least 60 people have died so far this year in gunfights between tenant farmers and landlords in the Nile Delta, as they battle over coveted parcels of lush farmland. One in 10 Egyptians is unemployed. Yet Egypt's current predicament is just one small part of a global problem: 37 countries face a crisis over food, according to the United Nations' Food and Agriculture Organisation.

And yet radical change is unlikely. Egypt's opposition parties face a status quo that has survived for half a century on authoritarianism and Islamism. Since a military coup in 1952, Egypt has had just four presidents, all strong military men who have justified the lack of democracy to their people and to the west by citing the threat posed by Islamic fundamentalists. But in

the teeming textiles markets of Cairo, business has never been worse. Nowhere in Egypt is economic hardship and growing resentment against the west felt more keenly.

On a Friday morning in late May, the twisting narrow lanes of Cairo's Khan el-Khalili bazaar are packed with worshippers flocking through the ancient streets. In the shadow of the al-Hussein Mosque, Habib Ahmed, a Sudanese-Egyptian trader, sits in a mouldy open shop-front, dwarfed by huge jute sacks of cotton, counting wooden prayer beads as the plaintive chant of the azan washes over him. In his other hand is a crude copy of the government futures projection for this year's crop. He places the grubby sheets of paper on the floor and kneels towards Mecca.

'I pray here on the ground, in the dirt, next to my cotton,' Habib says, raising his voice above the aggressive fire and brimstone rhetoric now emanating from the mosque's crackling speakers. The Arabic diatribe echoing around is is largely indiscernible. Occasionally I make out the

words 'Bush' and 'Olmert'.

'My decision to pray at my workplace, in private, is a political one,' says Habib. 'The west may be destroying our cotton industry but I am not a zealot. I'm an educated man and not convinced that Egypt's failure to stand up to

the United States is at the heart of our problems. I don't want to listen to this anger everyday. The government tells the world we are having a booming economy. So why can I not feed my family three meals a day? You have to

blame the government. You will see this when you meet the farmers; if I can't feed myself in the middle of the supply chain, what is there for them?'

On the wall behind my host is a faded British map of the Nile Valley, Egypt's agricultural heartland, from the Twenties. 'Less than three per cent of Egypt's territory is arable land,' says Habib . 'The best of it is found in the rich farmland of the Delta and the Nile Valley. This is where I get my cotton, but soon all our cotton will come from the Sudan and Ethiopia and we will sell it as Egypt's finest; either that or we will import it from the United States, just like everything else. You should go quickly before there 's nothing for you to see,' he laughs.

The Land Centre for Human Rights believes the cotton farmers' intensive farming methods are coming back to haunt them, exhausting their soil and polluting the irrigated Nile channel waters that feed it, reducing their annual yields, in many cases, to one-tenth the level they saw a decade ago. Larger farms can afford to regenerate soil by leaving a third of their fields fallow

for long periods, but this is impossible for tiny family farms.

'The farmers have still not escaped the old mindset that cotton is a good cash crop,' says Hamdi Wabid . 'It is becoming apparent that cotton is not an economical crop. Now it's just hurting people – and perhaps most tellingly the environment – badly, and many families are going under.'

Spanning nine countries and running almost 6,700km in length, the Nile is the world's longest river. It rises near the equator and flows north towards the Mediterranean. While the upper part of the Nile system remains in a fairly natural state, demands on the river begin to intensify as it reaches Sudan. At

this point, increased amounts of water are diverted for agricultural purposes, and as new diversion proposals come forward, there are growing concerns about the impact downstream.

As the Nile heads north towards Egypt, it is soon slowed by the giant Aswan dam. Located 900km south of Cairo and completed in 1968, the dam – built to eliminate flooding, provide electricity and open more of the Nile delta to farming – has blocked the Nile's sediments, which are no longer deposited at

the river's mouth. Consequently, without the ability to renew its soil, the Delta's extensive farmlands are increasingly barren.

Without the new sediments to build up the Delta, the land is shrinking, while erosion from the sea is now causing thousands of square metres of coastland to be lost each year. This has caused part of the Delta to subside and tilt, which, in turn, has increased soil salinity and groundwater contamination. As

it approaches the sprawl of Cairo, the Nile becomes increasingly polluted.

Once beyond Cairo, the river fans into this massive delta, where a host of waterborne diseases, such as schistosomiasis, also flourish. Finally, in the city of Alexandria, close to the Mediterranean, where almost 40 per cent of Egypt's industry is located, the river's mouth is exposed to even more pollut-

ants, ranging from oils to heavy metals.

Not surprisingly, the Nile's decline has had a severe impact on farming. In the countryside, Delta and Nile Valley farmers irrigate their fields more intensively, using fertilisers that leach into exposed monuments. In overcrowded villages and towns, raw sewage forms filthy sumps around magnificent treasures. Erosion, combined with the rising sea level, sends saltwater under the rich, fertile soil south of the Nile Delta, making it

almost impossible to grow crops.

'Now, with climate change, we are losing what we have gained over the last many thousand years, and the livelihoods of millions of farmers are under threat,' says Dr Salah Soliman, a professor at the Department of Pesticide Chemistry and Toxicology at Alexandria University. ' Grim forecasts are being made about how long they can sustain large-scale irrigation.'

According to Maged George, Egypt's Minister of State for Environmental Affairs, the effects of global warming will threaten 15 per cent of the land in the Nile Delta by as early as 2020.

Last year, archaeologists at the Fayoum oasis discovered the old-est known farming village in Egypt, a 7,000-year-old site whose residents grew wheat and barley and raised sheep, goats and

pigs. Farming probably occurred much earlier in Egypt, experts agree, but those first settlements would most likely have been along the banks of the Nile and would have been obliterated by periodic flooding and the course changes of the river.

Squatting on the dung-stained floor of his father's outhouse in the village of Zawat Al Kardsha, Riad Muhammad tells us he is nine and has never seen the inside of a classroom. 'I will be a cotton farmer, like my father and my grandfather,' he says, cleaning his tiny fingernails with a strand of straw. 'We get time to play and in the evenings we swim in the water channels.

Sometimes, after the harvest, we get treats and money to buy lollipops and balloons. My mother tells me she is proud that I work like a man to help my sisters. This is my fourth year in the fields. One day I hope to own my own land, that is my big dream.'

As we talk I notice Riad's hands. They are calloused and worn. 'I would like some gloves,' he says, 'the ants are always biting me. If you could send me some gloves I would be happy.