Cotton’s Perfect Storm

As commodities go, cotton has not been that different from others on the open market. The weather and worldwide government subsidy policies fluctuated within a fairly narrow range while worldwide demand slowly increased from year to year.

Today, that model has been turned on its head. Unprecedented bad weather (severe droughts and floods) has devastated crops in almost every major cotton producing region in the world including near complete and heart-breaking washouts in large parts of Australia and Pakistan. All in 2010.

Burgeoning middle classes in large developing countries like China, India, and Brazil have kept demand growing at its fastest pace in years. And the demand for organic cotton is growing even faster.

Last last year I got a call from Sergio, our partner on the ground in Peru. “We have never seen anything like this,” his voice had a sound of impending doom. We produce our entire line of organic baby gifts as well as some of our women’s organic tees  in Peruvian cooperatives. Sergio suggested that we buy enough cotton to supply an entire year’s worth of production because of predicted further price increases, something that is extremely difficult for a company of our size.

While spending time with our other partners, Jim and Sandy of Green 3 Apparel in Oshkosh, Wisconsin, they talked of “getting killed” by cotton prices and how challenging 2011 was going to be because of it. Green 3 supplies us with almost all of our USA-made clothing.

Headlines talk of big companies being squeezed by cotton prices. If big companies are being squeezed, small companies like ours are truly being choked.

The bottom line. The price of cotton clothing is going up this year. There is no way around it. We pledge to do everything we can to create other efficiencies in our business to keep prices as reasonable as possible. Fair Indigo has always been committed to the concept of “sustainable pricing.” Setting prices that are fair to workers (supporting living wage jobs) and provide just enough profit to continue to develop new products and find new customers. Long-term, this is the only sustainable economic model that will support workers and consumers here and around the world. Something we strongly believe in.

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