Organic Cotton Loses Premium on Demand-Supply Mismatch.

CHANDIGARH | COIMBATORE: A drop in demand for organic cotton in the West amidst an increase in output has forced large retailers to cut consumption. With the eco- friendly natural fibre unable to make a qualitative difference, apparel makers are reverting to conventional varieties.

“Everyone is looking at organic cotton as a good prospect but the premium it was enjoying five years ago has come down substantially,” said Coimbatore-based cotton analyst A Ramani. “Today, organic cotton commands a price of 5-7 cents per pound over conventional cotton. Five years ago, it was selling 20-25 cents per pound more than regular cotton,” he added.

Organic cotton prices are usually based on conventional cotton pricing. Today, ex-Indian port price of Shankar-6, the widely-used Indian cotton variety, is priced at 110 cents per pound while organic cotton prices rule at around 115-120 cents per pound. “The growth of organic cotton is phenomenal but the prices have come down a little due to a rise in production,” said Narendra Lodaya, a Mumbai-based producer of organic cotton. “The production of organic cotton has increased in India from 2 lakh bales in 2006 to over 7 lakh bales today,” he added.

Ludhiana-based Venus Garments (India), exporter of knitwear to international retailers like Wal-Mart, Old Navy and Tom Tailor, has seen a fall in new orders for organic garments this year. “We had a considerable good order for organic garments from Wal-Mart last year which it has not continued for this year. The demand is for conventional cotton garments with high organic cotton prices as a major reason,” said Venus Garments managing director Anil Jain. Industry sources said the company supplied over 5-6 million pieces of organic garments to Wal-Mart in 2009-10. The company, which sells organic garments in domestic retail chains UV&W and in over 500 MBOs across the country, has not seen a fall in demand.

For Arvind Mills, one of the biggest consumers of organic cotton in India, export demand has been good for its organic denim and shirtings. “Things are fine with organic cotton and demand has been pretty good on export front,” said Arvind Mills cotton purchase head RR Vinod.

Punjab-headquartered Vardhman group, which annually exports 6,000 tonne organic yarn to China and Korea is worried about the prices in international and domestic markets. “There is going to be a drop in demand owing to high organic yarn prices. With organic cotton arrivals yet to begin and new contracts to start from November, we cannot say what price they are going to rule in the year ahead,” said Vardhman group chairman SP Oswal.

Source : economictimes.indiatimes.com