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During the past few years, organic cotton market has become more global, with improved fiber quality, greater production and trade, more integrated supply chains and rapid growth in demand.
The global organic cotton fiber supply has increased 392% since the 2000-01 harvest to 25,394 metric tones during the 2004-05 crop years.
Supplies are projected to grow to 31,017 metric tones (68,237,400 pounds or 142,161 bales) by the end of the 2005-06 harvest, reflecting an annual growth rate of 22%.
In 2005-06, the four countries namely Turkey, India, United States and China combined are projected to produce 79% of the global organic cotton fiber crop.
The growth in demand for organic cotton is expected to accelerate since the brands and retailers would continue to implement long term commitments to increase the use of organic cotton (estimated global retail sales are projected to grow to $2.6 billion by the end of 2008, reflecting a 116% average annual growth rate). Also the manufacturer demand for organic cotton fiber is expected to grow to 99,662 metric tons in 2008, an average annual growth rate of 75%.
Some of the observations that can be made after analyzing the current scenario:
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Fad in EU
Demand for organic cotton is highest in Europe, accounting for 58% of the total retail market for organic cotton.
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Retail Push and Pull
Organic cotton is being pushed very strongly by the retailers since the organic products are usually sold at a premium price, thus giving the retailer a high margin. Retailers drive most of the demand for organic cotton both at front end i.e. consumer level and through the supply chain.
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Psychology driven demand
Purchasing an organic item of clothing is more of an emotional or philosophical decision, unlike the purchase of organic food which has obvious health benefits.
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Sustainability factor
The global area under cultivation is limited and shrinking because of population and environmental pressures. Organic farming results in yield loss (app. one fourth yield compared to conventional farming); hence organic farming may not prove to be sustainable. Moreover, the priority lies in feeding the world and providing basic clothing. Thus allocating cultivable area under organic farming is a matter of strong choice.
To support sustainable expansion in the global organic cotton fiber supply, it is recommended that brands and retailers, their manufacturing partners and farmers and organizations interested in organic agriculture work together.
Develop dedicated supply chains, with high levels of communication, planning and support between manufacturers and retailers, their business partners and farmers which help existing projects and new projects develop in a more sustainable manner. This would also help ensure that the farmers enjoy fair prices, incomes and returns in the organic cotton sector and are able to finance development and production growth on their own terms.
Merchant and brokers and brands can help reduce the market risk faced by farmers by making pre-plant commitments and/or forward contracts with organic cotton projects. At the same time increased investments from financial institutions, government and philanthropic institutions would help expand production in a sustainable way.
(The figures quoted above have been taken from www.organicexchange.org)
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