organic cotton in india_final

8/8/2019 Organic Cotton in India_final

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Organic Cotton in IndiaFacts, figures and issues

By: H. Lanting, MSc.ETC Consultants India Pvt Ltd

[email protected], www.etc-india.org


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Organic cotton in India:

facts and figures India produces presently over 50% of the

certified Organic Cotton in the world.

About 350,000 farmers were involved in2007-2008 season (A grade plus inconversion)

About 500,000 hectares were cultivated inthe 2007-2008 season (A-grade plus inconversion)


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Facts and figures

Thus about 5.5% of total cotton area isunder organic cotton (2007-2008 season,

A grade plus in conversion). An average of 1.4 hectares is grown perfarmer

Yield about 860 Kg raw cotton per hectare

Total yield was 73,702 MT of lint


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General Issues in organic cotton

sector of India Rapid spread of Bt Cotton: from 4% in 2004 to about

70% in 2009 on average. In high production potentialareas percentage Bt Cotton can be as high as 90%.

Sudden increases of Minimum Support Prices byGovernment of India make it difficult for buyers andfarmers

Emerging shortage of farm labor resulting in higher

prices for labor: costs of harvesting alone can be as highas 25% of gross income.

Lack of investment capability and lack of access to credit


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Bt Cotton Areas in 2007-2008 season

0

5

10

15

20

25

30

35

Andhr

aPr

adesh

Ma

dhya

Prade

shuja

rat

Mah

arasht

ra

Karnata

ka

TamilN

adu

Punjab

Harya

na

Rajas

than

Othe

rs

States

1000

00hectares

0

0.2

0.4

0.6

0.8

1

fraction

Btcotton

Total Area

Bt Area

% of Total

Source: Barik, 2008


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A problem in Madhya Pradesh and

Orissa?Percentage

Total area

under

Organic

cotton

(OE 2008)

Percentage

Total area

under Bt

Cotton

(Barik

2008)

Grand

total

organic

and Bt

Estimated

Percentage

of Total

area under

convention

al cotton

Madhya

Pradesh 56% 72% 128%

Orissa 88% 0% 88% 12%

Maharashtra 2% 81% 84% 16%

Andhra Pradesh 0% 91% 92% 8%

Rajasthan 1% 10% 11% 89%

Karnataka 0% 10% 10% 90%


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As most Organic cotton comesfrom MP, the problem needs to be

resolved

Total Cotton

Area in

hectares

Organic

cotton

2007/2008

in hectares

Estimated

Production

lint in MT

Percentage

contribution

of the State

to total

Madhya Pradesh 650000 159773 25% 47,993 65%

Orissa 75000 41615 55% 12,500 17%

Maharashtra 3194000 40005 1% 12,017 16%

Andhra Pradesh 1096000 214 0% 64 0%

Rajasthan 368000 3716 1% 1,116 2%

Karnataka 404000 36 0% 11 0%

9506000 245359 3% 73,702


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Farmers Dilemma

Cotton farmers in India face serious profitabilityissues in conventional cotton and therefore lookat alternative methods to enhance profitability :

Bt cotton

Organic cotton

but often also other crops like: maize, soybean andsunflower.

They also are heavily indebted to local moneylenders in a high risk environment: too little andtoo much rain in the same season.


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Organic farming:

do nothing farming Farmers often see organic farming as a kind ofDo Nothing Farming, reducing theirinvestments and risk.

As a result their investments, especially innutrient management but also seed, are oftentoo low for optimal results.

F

armers experiment with organic production,thus often parallel and part production takesplace, compounding certification problems


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Profiling the Organic Cotton Farmer

My guess is that the organic cotton farmer, whopresently starts to form the backbone of thesector, has the following profile:

Between 45 and 60 years of age without a successor;

Family farm

Risk avoiding

Trying to rely on his/her own resources minimizing

external inputs

Relatively small compared with other farms in thearea at large or


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Profile continued

Relatively resource poor (money, capitalassets, irrigation) compared with otherfarmers or

From a relatively low productive areacompared with other areas in the state/districtor

F

rom tribal area with limited access toexternal resources (information, knowledge,money, inputs, capital assets..) and markets


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Markets difficult and prices not as

good as hoped Transition period means loss of expected benefits tofarmers: Markets for IC1 and IC2 are limited, thuspremiums paid to farmers in first two years are often toolow to keep them interested.

Therefore farmers (and their promoters) often: exert pressure on certifiers to get immediate A-status saying they

were already producing organically earlier.

Want a fair trade certificate to enhance income during transitionperiod.

However, parties higher up in the chain are not eager to enterfair trade markets as it:

Enhances their general basic costs whilst the volume is small;

Demands organization of farmers into a potential opponent;


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Non Cotton produce: a problem

To ensure commitment of farmers it isimportant to market non-cotton produce atpremium

For non-cotton produce only limitedorganic markets exist (international butprimarily local).

Most farmers grow wrong crop or wrongvariety for international markets


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The organic seed difficult to obtain

and loss of genetic diversity Availability of untreated non-GMO seeds isvery limited, indents have to be placed almost a year in

advance. Mostly only major hybrids will be produced

leading to loss of bio-diversity.

Varieties, agro-eco-systems and markets: in dry environments only short staple cotton

will grow, markets demand medium to longstaple cotton.


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Organic farming enhances bio-

diversity and food security Most organic farmers rely on manualoperations and can thus easily deal withintercropping

To control pests many farmers intercropwith a mixture of cowpea, pigeon pea,green gram, black gram, soybeans and

smaller crops like coriander. These crops provide income and foodsecurity


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Many new skills are required

Farmers who want to become organicneed to acquire new technical and socialskills

It is estimated that about 600 skill changesare required

They need to grow different non-cotton

crops and need to produce biomass This requires substantial extension

investment


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Can farmers pay for extension?

There is no government extension agencyspecifically dealing with organic farming

To get a sustainable organic sector farmers

knowledge and skills need to be updated Preferably the sector pays for it, making it

immune for policy changes (which would be thecase if financed by Government)

Farmers cannot easily pay as their totaladditional income from premiums is about 40(US$ 56).


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Soil fertility management:

a major challenge Organic carbon content of the soils isgenerally very low: less than 0.5% OC.Enhancement is required, requires application

of large doses (more than 15 MT/hectare) andsubstantial investment.

Strict rules of organic certification makeNitrogen Management and required correctionof micro-nutrient deficiencies difficult.

Maintaining proper Nitrogen levels at yieldsbeyond 2000 Kg (raw cotton) per hectare isvery difficult under the present restrictions.


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Certification expensive and..

Insecurity for certifying agencies thus farmers:suspension of certifiers for short periods by APEDAhappens regularly and has serious consequences forgenuine organic farmers.

Fines are also regularly given to certification agents:surely they will incorporate this in their price calculations.

Costs of certification (internal system and externalinspection) are high and often not borne by buyers.

F

armers have difficulty accessing government subsidies(50% subsidy of certification costs is given by some stategovernments)


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Are there enough inspectors?

There are roughly 350,000 farmers to becertified for cotton only: assuming 25%sample to be visited at least once a

season, about 90,000 farmers need to bevisited requiring about 30,000 human daysper annum or 250 inspectors

one inspector per 1400 organic cottonfarmers is bare minimum.

(assuming 3 inspections per day inclusive of travel plus reportingtime and 120 working days per cotton season).


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Internal Certification..

The figure presented in the previous slideis only valid if a genuine internal controlsystem (ICS) is operational.

This ICS is, to the best of my knowledge,only allowed for small scale organizedfarmers. Not for contract farming.

The problem is: what is contract farmingand what are organized farmers?


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Organic, not Bt, are we sure?

As many Bt cotton varieties have beendeveloped for Hybrids that were already inuse, easy visual identification of Bt Cotton

by certifying agencies is impossible. Only real desi varieties, short staple

varieties and ELS varieties like DCH32 donot have look-alike GMO counterparts.

Bt kits are available but expensive andtime consuming thus not often used.


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Non-cotton GMOs posing threat fororganic cotton

To the best of my knowledge certificationagencies handle buffers between GMO andorganic cotton differently;

In the near future, with introduction of Bt pigeonpea, maize and egg plant, certification problemswill increase.

These crops are cross breeders whilst cotton isover 90% self pollinating

Thus buffer distances will have to increasemaking it more difficult to for farmers to getorganic certification


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Value chain: general

There is overcapacity and old equipment at eachand every step in the value chain Old equipment means low overheads but also low

output per unit of time and often also less thandesired quality

Only very few units are vertically integrated andfully modernized. Most units are specialized.

Power, labor shortage and wages increased dueto National Rural Employment Scheme aregeneral problems faced.

Profitability is a problem at each and every step.


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Lack of liquidity and itsconsequence

Many of the parties operating on organic marketcannot immediately pay farmers as banksdemand contracts with ultimate buyers before

they grant loans. Farmers cannot get loans on the basis of valueof their raw cotton but need cash to pay forsubsequent harvests

This leads to organic farmers selling the cottonthey grew and at times buying other cotton atlater stage


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The relative small volume oforganic cotton is a problem

Each step in the value chain (of any type ofproduct and most manufacturers) deals with onlya very small volume (say 5 %) of organic cotton.

Fair trade cotton, an even smaller percentage, isincreasing the general costs of a company andthus reduces competitiveness in conventionalmarkets.

Many clients, however, expect full organic andfair trade certified products


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Will there be consolidation in theorganic cotton chain?

Personal observations suggest that there mightbe a number of parties that will downsize theirinvolvement in the organic market as their

expectations of improved profitability did notmaterialize.

Who will remain in the market? My guess: verylarge players (with risk bearing capacity and

liquidity) and small players who can cater forsmall buyers in a niche market.


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Why does organic cotton marketnot grow?

Prices are too high at all levels (except farmgate prices).

Inefficiencies in the chain:

Cotton is produced in widely dispersed areaswhich are at times difficult to access, increasingtransaction costs.

Volumes processed in each step in the chain are

too small, leading to extra costs Quantities ordered by clients are relatively small

and highly specific, leading to high costs


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One dollar becomes eight

The practice of adding percentages in thevalue chain to calculate profit keepsfarmers at losing end: a one dollarincrease at farmers level leads generallyto an eight dollar increase of the retailprice


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Conclusions

The organic cotton sector in India is relativelysmall and its statistics still not reliable.

The sector is fragmented therefore prone to

inefficiencies increasing its costs Most of the organic cotton is rainfall dependent

The average organic cotton farmer is small,

resource poor with limited access to knowledge,inputs, credit and markets


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Conclusions 2

Yields of organic cotton are low mainly due tolow Organic Carbon percentage leading to lowsoil fertility and water-holding capacity

Organic seeds are difficult to obtain, thus a seedproduction program, producing medium and longstaple straight varieties, is warranted

A well coordinated research program for organic

farming should be developed in consultation withorganic production programs (The present wellfunded NCOF works a bit in isolation).


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Conclusions 3

APEDA should develop policies whichprotect genuine organic farmers whilsttaking action against erring certifiers

Certification bodies should declare theirstaff-farmers ratio as a proxy of theirgenuine capacities to guarantee their

certificates and furnish proof of the same


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Conclusions 4

Farmers require immediate payment at harvesttime. This is often not possible for buyers. Therules for providing loans against stock should

change to make it possible for banks to giveloans against raw cotton stocks to farmers.

Farmers should be organized in groups atvillage level to increase efficiencies and reduce

costs, especially if they are expected to pay forservices.


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Conclusions 5

Many houses are engaged in organiccotton value addition resulting in eachhandling very small quantities (about 5%

of their turn-over) Though competition is OK, this is

inefficient.

It would be better that each house handles50% organic and 50% conventional (tospread risks and to reduce costs)


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Conclusions 6

For this to happen, total volume of organiccotton on the world market shouldincrease, which will only happen if prices

for the buyer of the final product aresimilar.

But: also at farmers level income oforganic and conventional cotton should besimilar, still a major challenge (as Bt cottonis presently by and large more profitable)


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A partial solution?www.cottonmatters.com

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