Photo source: looporganic.com
It is clear that producing organic cotton, especially certified organic cotton, costs more. The transition from conventional growing to organic growing can be a significant burden on the small to medium size farmer.
While it is true that certified organic cotton can receive a price premium, worth the cost of investment, the process of certification can take months to years. Meanwhile, the farmer must invest thousands of dollars in transforming its farming practices to meet the certification requirements.
Organic farming upgrades include:
• Transition to zero pesticide use (FYI cotton happens to be one of the highest-pesticide dependent crops in the world so transitioning the crop to no pesticides and still yielding a productive, viable crop is no small feat). See Green Cotton for more information.
• Better use of water management
• Must be grown using methods and materials that have a low impact on the environment.
• Farming production systems must replenish and maintain soil fertility.
• Farming must reduce the use of toxic and persistent pesticides and fertilizers; and,
• Organic farming must build biologically diverse agriculture.
While the above list of organic farming requirements are all terrific, they are, as one can imagine, incredibly costly. Unless a farmer can ensure that the new crop will yield the price premium it deserves, transitioning over to these methods could mean the end of their business.
We have all read lately about the 3 and 4 fold surge in organic cotton demand. For example, organic cotton sales, not including other organic fibers, reached $1.1 billion in 2006 and is projected to double to $2+ billion in 2007 (Organic Exchange 2007). More and more retailers are demanding use of organic fabrics, including some of the largest ones (e.g. Wal-Mart, Barney’s and Target). At the same time, the supply can not easily keep up with demand, especially when certified organic farming can take years to establish.
As noted in the above requirements, it can be very risky for a farmer to transition too quickly unless they can be assured that there is a buyer. Furthermore, because the organic transition can take years to complete, the in between years mean higher costs for farmers and potentially low returns if not going out of business.
There are some retailers however who are recognizing this problem, AND in addition to being benevolent, happen to be the largest potential buyers of the organic cotton themselves. As such they are willing to step in and ease the transition for farmers by buying their transition product at the premium price. To be specific, Wal-Mart recently offered to pay transition farmers, those that are converting their farming practices from conventional to organic, the premium price for organic, even though their product is not yet certified. Side question: Is Wal-Mart going to label this product in their stores as organic cotton? This is one issue, since there is A LOT of organic cotton on the market that is not truly certified organic. Suppliers tend to overuse the term for the benefit of marketing, without communicating the whole truth as to whether it is CERTIFIED or not. This is a side note, but something for consumers to be aware of when they shop for organic clothing…
All in all, by Wal-Mart paying the interim premium price, it helps the farmers lower their risk, remain in business, AND be well-positioned to provide the increased supply needed of organic cotton to buyers such as Wal-Mart and Barney’s who want the organic cotton.
Note: Organic Certification requires a 3rd party organization to verify that farmers are using the methods and materials allowed in organic certification. Find out more about organic cotton certification at the Organic Trade Association .
You can read more on this particular issue at Reuters.