> Trade Relations
WHAT ARE THE CONCERNS ?
It is uncommon for textile brands and retailers to know where their cotton is spun or knitted let alone where it was originally grown. With organic cotton the organic certification needs to accompany the fiber every step of the way. Depending on a company’s business model, trade transactions can take place between a number of different actors within the supply chain. At the very least the organic transaction certificate will follow the cotton through its transformation from plant to garment. In these cases, whilst the certificate of the cotton is traceable, the end-customer (e.g. brand or retailer) will not necessarily know details of production beyond legal requirements. It’s also not necessarily clear who is benefiting from the ‘price premium’ and by how much. This model may have many players or middlemen in the chain. The deal between players will depend almost entirely on market conditions at the time, or the urgency of the grower to sell his or her cotton.
How is organic priced? There is no formalised mechanism for arriving at a price for organic cotton. The rule-of-thumb is to take the commodity price (this is usually the price quoted in the country of origin on the commodity market at a set time) and add a percentage increase (often called a ‘premium’ but should be seen as a ‘fair price’). This premium commonly sits between 10 and 30 percent, but can range from 5 to 50 percent (and beyond) over the commodity price depending on a number of factors; such as market conditions, arrangements between supply chain players, and product quality (TE). The ‘fair price’ is supposed to cover, for example, cost of production (for farmers), investment in farming operations, organic certification, and training and extension services. It’s also meant to be enough for broader socio-economic development of the community – schooling, health and housing. We call it a fair price because it is more likely to reflect the cost of production and the ongoing viability of the farmer’s business.
An increasingly attractive option is a value chain model which allows the brand/retailer or the manufacturer to develop closer and longer-term business arrangements with the producer groups. Agreements and contractual conditions made earlier in the cotton cycle can provide mutual benefit and satisfaction for both parties. Some brands, retailers or end-product manufacturers are moving towards ‘vertically integrated’ value chains, and working directly with spinners (who often have the closest working relationship with the producer groups), some even integrate their growing and ginning into the partnership. Benefits to the producers might include pre financing (for biological inputs, etc), guaranteed price and guaranteed purchase of product. Benefits for brands can include security of supply and thus the ability to pre plan and improved quality due to focussed farm investment. With more established partnerships we are also seeing profit-sharing, board representation, and shared investment in community projects such as schools, health centres, infrastructure, and support of local entrepreneurship. The beauty of this sort of economic development is that it is based on ‘trade not aid’ and usually involves more autonomy for the producers and a more equitable distribution of influence.
WHO'S DOING WHAT ?
There are a growing number of brands and retailers working more closely with their organic cotton growers. One of the best examples is Anvil Knitwear and the Texas Organic Cotton Marketing Coop who, together, have pioneered organic in the US. Anvil’s journey into organic cotton started in 2007 when it first launched its AnvilOrganic® line of t-shirts. Anvil attributes its success to the fact that it turned its supply chain into a partnership. Anvil works closely with The Texas Organic Cotton Marketing Cooperative (TOCMC), which currently grows most of the organic cotton in the United States, to help develop and promote the US organic fiber market.
Anvil customers such as Billabong® have used transitional cotton in their t-shirts and Disney Stores® has used organic cotton for its graphic t-shirt line. Anvil’s support for organic cotton is based on its belief that organic cotton has less impact on the environment and evidence of this is Anvil’s comparative ‘cradle-to-grave’ gas (GHG) life cycle analyses comparing its AnvilOrganic® t-shirt and AnvilSustainable™ t-shirt to its Anvil® Basic Cotton t-shirt. Anvil evaluated the reduction of chemical pesticide and fertilizer use resulting from organic cotton farming and, based on data provided by TOCMC, for every pound of cotton lint produced using organic farming methods, an estimated 0.0104 pounds of herbicide, insecticide, growth regulator and defoliant active ingredients and 0.3855 pounds of chemical fertilizer are not used. In addition, TOCMC evaluated the amount of water used to grow its organic cotton. It estimated that approximately 60% of their organic cotton acres are dryland. Based on TOCMC calculations, they estimated that their 2009 crop used approximately 250 gallons of irrigation water per pound of lint when you combine the irrigated and the dryland.
More recently, Anvil made a commitment to TOCMC to double the amount of U.S organic cotton acreage through both consumer and farmer education. The launch of Double It! included a video short titled “Message From Earth: Organic Matters” which Anvil released at Farm Aid in 2010(ANVIL).