The world price of cotton has been in steady decline for several decades. In the 2001-02 season cotton prices fell to US$0.92 per kilo - the lowest level in 30 years.
Below you can find out about:
- Problems facing cotton producers
- Benefits of Fairtrade for producers
- Fairtrade certified producers
- Buying and selling Fairtrade cotton
Problems facing cotton producers
An estimate of 100 million households are involved in cotton production in 70 countries around the world.
An estimated 100 million households are involved in cotton production in 70 countries around the world. The largest cotton producing countries are the United States, China, India, Uzbekistan and the West and Central African region. Cotton is an especially important source of employment and income within West and Central Africa, India, Pakistan, and Central Asia.
The world price for cotton has been in steady decline for the past couple of decades. In the 2001-02 season cotton prices fell to US$0.92 per kilo - the lowest level in 30 years. While the current price has recovered somewhat the value of cotton is still only a third of what it was in the early 1980s.
The declining value of cotton
About three quarters of the US cotton crop is thus 'dumped' on the world market, often priced below the costs of production.
The declining value of cotton is a result of the growing use of synthetic fibres like polyester and nylon. Cotton has fallen from 88% of total fibre use in the 1940s to just 40% today. The highly subsidized cotton industry in the United States, the European Union (EU), China, and other producing countries adds further pressure to prices. Cotton producers in the United States receive approximately US$4.2 billion in government subsidies. This is equivalent to the value of their entire crop. About three quarters of the US cotton crop is thus 'dumped' on the world market, often priced below the costs of production.
Cotton production in developing countries is less resource intensive and costs less. For example, it costs only US$ 30 cents to produce a pound of cotton in Benin versus US$ 68 cents in the United States. Nevertheless, it is the cotton farmers in the South who suffer the most from the low global cotton prices, since they rarely receive subsidies.
Benefits of Fairtrade for producers
Since the introduction of the first Fairtrade Minimum Prices for cotton in 2004, Fairtrade has demonstrated it can substantially improve the lives of cotton producing communities. By selling to the Fairtrade market, cotton farmers have the security that they will receive a Minimum Price which aims to cover their average costs of sustainable production. They also receive a Fairtrade Premium which allows them to invest in community projects, such as schools, roads or health care facilities.
Fairtrade Standards for cotton
Among other things Fairtrade Standards in cotton ensure the following:
- The Fairtrade Minimum Prices for cotton are set at different levels depending on the producing region. The Minimum Prices always cover the costs of sustainable production. Furthermore, if the market price is higher than the Fairtrade Minimum Price, the market price applies.
- Fairtrade Minimum Prices for organic cotton are set 20 percent higher than the Fairtrade conventional Minimum Prices.
- In addition to the Fairtrade price, the buyers must pay a Fairtrade Premium of US$ 5 cents per kilo of Fairtrade seed cotton. This is used by the producer organizations for social and economic investments such as education and health services, processing equipment and loans to members.
- Environmental standards restrict the use of agrochemicals and encourage sustainability.
- Pre-export lines of credit are given to the producer organizations if requested, of up to 60 % of the purchase price.
Fairtrade certified producers
Fairtade cotton producers are usually small family farms organized in cooperatives or associations which the farmers own and govern democratically. The only exception is in India and Pakistan, where some cotton producing communities are not organized in cooperatives, but are selling to a promoting body. The promoting body is responsible for passing back to the individual farmers the extra benefits generated by Fairtrade sales.
You can read a number of case-studies of Fairtrade cotton producers on the Fairtrade Foundation website.
To find out which cotton producer organizations are currently Fairtrade certified, you can check the database available on the FLO-CERT website.
Find Fairtrade Minimum Prices and Premiums