TEXAS – [25.05.10] The latest headline figures on organic cotton retail sales supplied by Organic Exchange (OE) show a healthy 35% growth to a value of US$4.3 billion in 2009, but they also suggest that like the conventional cotton sector, there is considerable ‘mark-up’ taking place along the supply chain with very little profit trickling back down to impoverished farmers.

As Ecotextile News reported back in February, the Organic Cotton Market Report 2009 released by Organic Exchange revealed that organic cotton production in 2008/09 grew by 20% from 145,872 metric tons (MT) to 175,113 MT (802,599 bales) on the previous year.

If the baseline price of a kilogram of cotton is around US$1.76, effectively what traders reckon to be the average ‘break even’ point for organic cotton, this suggests that the value of the 175,113 MT of fibre comes to roughly US$308.2 million, a mere 7% of the total retail value of the organic cotton garments.

This suggests that each tonne of organic cotton grown generates around $24,500 in retail value per tone of organic cotton fibre which is fetching US$1760 based on the above figures.

While of course it is accepted that each player in the supply chain, from trader, to yarn manufacturer, to fabric/garment maker and on to retailer, adds their own mark-up to the product, what the report does show is that the actual value of organic cotton fibre remains some way below the headline retail figures. The biggest mark-up by far will be at retail stage.

The information we hold at Ecotextile News also shows that a typical UK mass market retail pricing model typically factors in a 5% value for the cotton in a basic t-shirt.

Admittedly, our basic calculations lump in all organic cotton products together, but the fact that farmers received a meagre 7% of the value of all organic cotton garments sold in 2009 seems very low – especially when retailers are shifting these products based on their social as well as environmental benefits.

The Organic Exchange report also highlights the leading twelve organic cotton-using brands and retailers globally in 2009. They were (in order): C&A (Belgium), Nike, Inc. (Oregon, USA), Walmart (Arkansas, USA), Williams-Sonoma, Inc. (California, USA and recorded last year as Pottery Barn), H&M (Sweden), Anvil Knitwear (New York, USA), Coop Switzerland, Greensource Organic Clothing Co. (Washington, USA), Levi Strauss & Co. (California, USA), Target (Minnesota, USA), adidas (Germany) and Nordstrom (Washington, USA).

The volume of organic cotton that these brands used was not disclosed. Although it’s interesting to note that brands such as the UK’s New Look did not make the list. It reportedly sold 2.3 million pieces of organic cotton clothing in 2008 – accounting for somewhere between 750 – 850 tonnes of organic cotton fibre by our estimates.

According to OE, the expansion of the global organic cotton market was driven in large measure by consumer interest in ‘green’ products, significant expansion of existing organic cotton programs by brands and retailers, and the launch of organic cotton programs by new entrants to the market.

OE projects the global organic cotton market will grow between 20% to 40% in both 2010 and 2011 to result in an estimated US$5.1 billion market in 2010 and US$6.0 billion market in 2011.

Despite these impressive growth figures, organic cotton still only accounts for just under 0.8% of global cotton production.