Resource Building a Farmer-Owned Company and Linking it to International Fashion Houses under Fair-Trade Arrangements
Type Conference or workshop paper
Last update: 24/12/2010
Type: Conference or workshop paper
Language English
Year of publication: 2005
Citation: Lanting, H., 2005. Building a Farmer-Owned Company and Linking it to International Fashion Houses under Fair-Trade Arrangements.
Authors: Herman Lanting
Target countries: India
Summary In India, notably Andhra Pradesh and Maharashtra, an organic farmers’ producer company — aiming to have in 2011 between 10,000 and 20,000 small and marginal cotton farmers as members — has been in the process of development since February 2004. This producers’ company is build on farmers’ groups (about 20 members) and will be established and owned by Mutually Aided Cooperative Societies (about 500 members each), which have clusters of farmers’ groups as their members (about 24 Farmers Groups each).

The self-financed farmers’ producer company will have a training unit, a marketing unit and a credit unit. It will trade in organic cotton and other organic products. The trainers of the training unit will be farmers who get special training for this purpose (about three weeks a year over a three-year period) and who have participated in a season-long FFS (Farmers Field School, 20 sessions of four hours) and the Participatory Technology Development (PTD) program. Credit is mobilised from the banking sector and loaned to Farmers’ Groups. Agricultural products are certified organic and ‘fair-trade’. The products are bought at a premium. Cotton will be used by Made-by — a fair-trade label — and a variety of other labels in which a number of fashion houses participate. They sell clothes that are, partially, made using fair-trade and organic cotton.

Setting up a farmer owned company that trades in organic and fair-trade cotton is not a simple exercise. It has many dimensions. The ‘fair-trade’ aspect of the program creates many challenges: we have to work with 70 per cent small scale farmers, labour relations have to change. The fact that we need to work with 70 per cent small farmers increases operational costs, as only small acreages will be changed into organic farms by training large numbers of people. Literacy rates under this type of farmers are low (about 40 per cent) and thus finding qualified people for functions in the OCGrA is not easy and learning periods are long.

The functions of OCGrA are similar to those of the present moneylender cum trader but have to be provided cheaper and better. The credit arrangement for 2005 shows the farmers that they can access cheaper credit and get their quality inputs in time at reasonable costs.
The criteria set for organic certification, mainly the fact that no parallel production is allowed on a farm, are challenging. Most farmers would want a second year of parallel production to find out whether organic farming works out well for them. On the other hand, they would like to avail of the premium as soon as possible.

Technically the farmers are challenged because the huge quantities of
organic manure required under organic farming. They are willing to plant trees but face difficulties in mobilising the required quantities of organic manures until the trees start providing sufficient pruning materials for compost making. This too would suggest that some extra time should be given to change-over or extra support should be given to the farmers to mobilise the inputs.

There are major volume issues in building up the OCGrA. At ginning level at least 800 acres of cotton should supply one gin. In order to influence the textile chain and get fair-trade issues being debated and action taken, very substantial quantities of cotton have to be produced and traded (at least 850 metric tonnes of lint). Clearly the market in the Netherlands (Made-by label) is too small to absorb these quantities and other markets have to be developed.

Fair-trade premiums should be 30 per cent, organic premiums about 20 per cent of the prevailing market prices and certification costs should be born by the buyers (another 20 per cent). This means that buyers should be prepared to pay 70 per cent more (or 0.65 euros per piece of garment) to the farmers to create the required conditions for progress.
Role Organisation
Network Organisation organisation details Fair Price and Fair Wages
Network Organisation organisation details Farmer Field School Network and Resource Centre
List Keywords
1.1 Socio- economic Sector (OECD) 311 Agriculture  
FFS Topics Agriculture