Inventories of organic cotton rose in 2008 as global organic cotton production outpaced demand and fibre inventories held by merchants, spinners and integrated mills increased significantly, according to an advisory from the Texas-based Organic Exchange non-profit organisation.
The warning comes prior to the release of the Organic Cotton Market Report which will be released in February 2009 which notes that although the organic cotton market continues to grow despite tough economic conditions, continued growth will be at a slower pace than in previous years.
“Brands continued to expand their organic programs in 2008,” said Organic Exchange, “demand for organic cotton fibre to support these program increased to just under 77,000 metric tons, an increase of 33% over the previous year.” The organisation went on to say that despite difficult retail sector dynamics, “brands continue to be upbeat about the organic cotton market, and many plan to continue expansion of their product offerings in 2009.” Demand for organic fiber to support brand demand is expected to increase to 96,407 metric tons, an increase in 2009 of 24%.
However, there is concern that inventories are still too high and could even grow in 2009 putting serious pressure on the price farmers get for their organic cotton.
“If fibre production rates hold steady, or increase in the coming 2008/09 growing season, and fibre demand grows at the rates described above, the global cotton market will have substantially more fibre available at the farm level and in mill inventory than in previous years,” noted Organic Exchange.
Around 12,150 metric tons or approximately 8% of total 2007/08 production remained at the end of the growing season in ending stocks.
To help alleviate potential pressure on organic cotton prices, Organic Exchange has strongly advised farmers to make informed choices about planting, fibre purchases and product offerings. “We strongly recommend that farmers secure purchase commitments prior to planting in 2009 and take other measures to ensure sale of their fibre before and at harvest.”
Manufacturers are also encouraged to seek planning information from their customers to better help them determine appropriate levels of organic cotton fibre to hold in inventory. “We also encourage them to strategically plan fibre purchases with their customers, and to formalise their purchase agreements with farmers or merchant/brokers through forward contracting.”