Trade and marketing

In order to find buyers for organic cotton and other crops, consult directories of companies involved in organic sales or attend trade fairs for organic products.

Ideally, farmer organisations establish partnerships with several buyers who are ready to purchase defined volumes over a certain period of time at agreed conditions. The template “Memorandum of understanding” provides an example of how a farmer organisation, a final buyer and a facilitating NGO agree on the terms of their collaboration.

The price at which the farmer organisation can offer the cotton depends on the price they pay to the individual farmer, the transport and processing costs, and the margin it needs to charge for its services. Initially, while volumes are still small, it will not be possible to include all the operating costs in the product price. A production and financial planning (price structure) shows what margin the organisation needs to charge in order to be able to break even eventually (see figure below). Even if external development funds are available, it is advisable to integrate this margin in the price calculation right from the beginning of a project, as it is difficult to raise the sales price later or to reduce the amount paid to the farmer.

 

Calculation of operating costs (for management, extension staff, certification, depreciation of investments, etc.), income (from margins on sold products), and project facilitation costs (e.g. for an NGO supporting the set-up of the value chain).

 

Farmers usually receive a price for organic cotton that is 10-20% above the market price. Projects that apply the FLO Fairtrade standards receive a fixed minimum price for organic cotton, as well as a Fairtrade premium for community projects. The cost and income calculation tool (link to tool Cost and income calculation) provides an example of how to calculate costs for each stage of an organic and Fairtrade cotton value chain to obtain a cost-covering price for the cotton lint.


Keep in mind that the cotton lint is not the only product that has a value. Cotton seeds and even linters should also be taken into account. If the seed cotton is sold to a ginning company without the by-products being returned to the farmers, the value of the seeds and linters should be subtracted from the ginning fee.

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This platform is a joint project by ICCO, SECO, Textile Exchange and HELVETAS Swiss Intercooperation. For any queries please contact: info@organiccotton.org.