Chinese Government Reforms Trigger ‘significant Opportunity’ For Brands To Help Build Stronger Supply Chain

LONDON — February 26, 2015 — CottonConnect says the shifting cotton market in China offers a valuable window of opportunity for international companies to invest and build a more resilient cotton supply in one of the world’s fastest growing cotton markets.
In a new report from Cotton Connect, ‘China’s Cotton: A Growing Market Opportunity’ the organisation outlines the urgency of taking action at both a strategic and farm level.  It says that by leveraging technical, financial and political support for the industry – as well as providing urgent  support at the farm level – brands and retailers have a chance to show leadership in building sustainable cotton interventions to help build a successful supply chain in China.
Chinese government subsidy reforms last January triggered the latest downward shift in prices for cotton, which fell by around 60% to 13,605 yuan (roughly £1,417) per tonne during the last nine months of 2014, according to the latest China Cotton Association’s price index.
China is now the world’s largest producer, importer and consumer of cotton, holding around 58% of the world’s total stockpile of the raw material (International Cotton Advisory Committee).  Since China’s accession to the World Trade Organization in 2001, its textile and apparel exports have grown by 50% and the nation has doubled its share of global exports in less than a decade, to around 25% (Global Trade Analysis Project).
However, at farm level, cotton is fast-becoming a less appealing crop for farmers, plantings are predicted to fall 6% to 31.6 million hectares across China by 2015-16, according to ICAC, if intervention does not happen.
CottonConnect warns that more support is needed for smallholder cotton farmers across the country as they continue to grapple with environmental, economic and social challenges. On top of falling prices, growers are also struggling with changing rural demographics, an emerging water crisis, rising labour costs and a lack of access to credit and financial literacy.
Alison Ward, CEO, CottonConnect, said:
“As the biggest market for cotton in the world, international brands have a vested interested in ensuring that the market and supply chain is thriving.  The Chinese cotton industry has reached a pivotal point.  
“There is a growing need – and a huge opportunity – for international and leading Chinese brands to support the cotton sector in this time of transition by showing leadership, collaborating with others and investing to help build a more sustainable cotton industry for the future.”
Thanks to falling cotton prices, brands and retailers have a significant and strategic opportunity to show leadership by improving relationships with cotton farmers on the ground and sharing best practice in basic agricultural techniques and technologies in China’s key cotton-growing regions.
Strategic and Practical Opportunities for Brands.  The key opportunities outlined in the report are:
At a strategic level:
More competitive cotton prices in China, with the change in government subsidy leading to Chinese cotton prices falling in line with international prices, after sustaining a 30% premium for many years, markets are opening for international brands.
High quality cotton with strong downstream infrastructure, means China still retains an edge on quality and efficiency. A cheaper, better quality cotton both sourced and processed in China could create greater efficiencies for global brands sourcing from, and selling to, the China market.
Greater sustainability becoming a licence to operate, with China’s 12th Five Year Plan setting out clear expectations for cleaner, greener growth in the textile sector, greener and more productive agriculture, better water protection and rural regeneration. Opportunities for brands to demonstrate leadership and safeguard your licence to operate in China. 
At a farm level
Support for farmer finance and literacy. Brands and their suppliers should conduct a needs-assessment of priority cotton communities that can inform the subsequent development of financial interventions. For example, modules for financial training or micro-finance tools, such as loans or crop insurance protection.
Support for effective water management. Brands should be seeking to understand and address water issues at a farming-community level as a priority. This might include mapping water footprints at farm level or developing training focused on behaviour change.
Encouraging rural entrepreneurship in cotton communities. An opportunity exists to support ‘left behind’ children and young adults affected by cotton migration. 
CottonConnect – which connects retailers to suppliers and cotton farmers on the ground by building transparency, sharing best practice and improving farmer livelihoods – believes that now is the time for international and Chinese brands to step up to help secure a sustainable future for the industry in China.
CottonConnect has worked with 130,000 cotton farmers and their families in China, India and Pakistan, proving that basic interventions can make a huge difference to the livelihoods of cotton growers.  The organisation has collaborated with major brands, including Primark, John Lewis and C&A Foundation, to help improve the resilience of cotton supply chains in cotton-growing regions across the developing world.

Posted March 24, 2015

Source: CottonConnect