How to Get the Most Subsidy After the Cotton Direct Subsidy Policy Is Implemented
Li Guoxiang, a researcher at the Chinese Academy of Social Sciences and a renowned scholar on agriculture, rural areas and farmers, suggests that whether they are cotton farmers in Xinjiang or cotton farmers in the interior, under the premise that the state has subsidies benefiting farmers, they should also pay attention to one point: it is best not to sell cotton all at once.
After the cotton direct subsidy policy is implemented, how can farmers get the most subsidy?
The 2014 cotton year was the first year of the pilot reform of the cotton target price in the Xinjiang region, and many parties also focused on this autumn's cotton market, analyzing the cotton production and sales situation under the new policy. For this reason, a reporter from China National Radio's "Countryside" program went specially to Xinjiang for an interview. It is understood that the current cotton output and prices in Xinjiang have both declined, and cotton farmers are also waiting to see whether the subsidy they receive at the target price can guarantee their returns.
According to a report by China National Radio's "Countryside" program "Agriculture, Rural Areas and Farmers China," it is currently the cotton picking period. According to Aili, a cotton farmer in Jiashi County, Kashgar, because this year's windy weather affected cotton output, the cotton was slow to open its bolls. In previous years, cotton output in southern Xinjiang was about 400 kg per mu, but this year it is expected to be only 300 kg.
Cotton farmer Aili: “The weather is no good, and this year the cotton cannot open either. It's no good.”
While output declined, the planting area also shrank. According to statistics from the National Development and Reform Commission, in 2014 the national actual cotton planting area was 60.28 million mu, and the planting area was expected to fall 8.7% from last year. In addition, because some cotton regions suffered meteorological disasters such as drought and high temperatures in the earlier period, Liu Xiaonan, deputy director of the Department of Economic and Trade of the National Development and Reform Commission, said that the full-year cotton output was expected to decrease compared with the previous year.
Liu Xiaonan: “This year's cotton area has declined. It is initially estimated that this year's actual cotton output will be about 6.5 million tons, a decrease of 500,000 tons from the previous year.”
As for prices, having lost the protection of the minimum protective price, cotton prices under market dominance have fallen significantly compared with previous years. The former minimum purchase price was higher than 9 yuan per kg, and now it has generally fallen to less than 7 yuan. Maimaiti Tuerxun, a cotton farmer in the Kashgar region, heard that cotton prices were good in the Aksu region, so he quickly pulled a cart over to Aksu to sell, but unexpectedly the purchase price in Aksu had also dropped from 6.7 yuan to 6.5 yuan, and during our interview it fell again to 6.2 yuan. Maimaiti told the reporter that he had originally hurried over to sell for a good price, but now that the price had plunged, he was so depressed that he did not even want to eat.
Cotton farmer Maimaiti: “Last year the price was more than 9 yuan, and this year it is still 6.5 yuan, so I don't want to sell. Now it is all for nothing. If all the workers are counted, one mu of land costs 1,700 to 1,800, and one mu yields 300 kg of cotton. If sold at 6 yuan this year, even two or three hundred is not left. Now labor costs are so high, and it is hard to find people. The cotton has been brought here, and the price is so low again. The boss still says 6.5 yuan, and we still don't want to sell.”
According to the implementation plan for the pilot reform of the cotton target price in Xinjiang, September to November is the price collection period. The state will calculate the average purchase price of cotton in the market during this period, and if it is lower than the target price, it will then subsidize farmers with the price difference through a certain method. Therefore, many cotton farmers clearly have a psychology of holding back sales, and everyone is waiting to see, for fear that the price at which they sell will be lower than the average price and cause them to receive less subsidy. Li Guoxiang, a researcher at the Chinese Academy of Social Sciences and a renowned scholar on agriculture, rural areas and farmers, believes that cotton farmers should not worry too much.
Li Guoxiang: “Farmers themselves must understand clearly that the price at which they sell their cotton actually forms part of the average price, so there is not much need to worry that their own price is lower than the average price. They should learn about and observe what the cotton prices in other places actually are. If the price at which they sell is the same as in other places, then this price should be the average price.”
In addition, according to statistics, apart from the Xinjiang region, major cotton regions in the interior also showed the characteristics of “large reductions in area in major cotton counties and large reductions in area among large growers.” Hebei's spring cotton planting area was 7.23 million mu, down 16.4% year on year; Jiangsu's cotton area may fall below 2 million mu for the first time, down about 20% from last year; in Jiangxi, major cotton-planting counties with more than 100,000 mu, such as Pengze and Duchang, both had reductions of more than 10%, and many large growers reduced their area by nearly 50%.
In order to better protect the interests of cotton farmers in the interior, the National Development and Reform Commission stated that, in addition to the Xinjiang pilot, cotton subsidies will be extended to the interior, and fixed-amount subsidies will be given to cotton farmers in the main cotton-producing areas of the Yellow River and Yangtze River basins. So how large will this fixed-amount subsidy be?
Li Guoxiang: “For cotton farmers in the interior, according to their actual planting, the state will later give corresponding compensation. This has little to do with sales and the market. It is mainly to make up for this year. Because our target price reform pilot is in Xinjiang, cotton farmers in the interior may not know about it or may not have had time to adjust their structure, so this makes up for the economic losses they suffered. For example, appropriately sharing part of their costs with them. In fact, this part may not necessarily reach the same high subsidy standard as that for Xinjiang cotton farmers.”
It seems that the fixed-amount subsidy in the interior is not as strong as the target price. In fact, for farmers, apart from part of the state subsidy, whether income can increase still specifically depends on whether they themselves can increase income. Under the same policy, some farmers grow cotton with high output and good quality and can increase income; some farmers' cotton suffers disasters and may see reduced income. For this reason, Li Guoxiang suggests that whether they are cotton farmers in Xinjiang or cotton farmers in the interior, under the premise that the state has subsidies benefiting farmers, they should also pay attention to one point: it is best not to sell cotton all at once.
Li Guoxiang: “From what I understand, cotton cannot be stored in the interior for a very long time. If the current price is fairly suitable, then one should actively sell. When it comes to November, because you are selling all at once, buyers may lower the price. I would suggest that farmers can adopt a measure called risk management. It is commonly called not putting all your eggs in one basket. That is, when selling cotton, you can sell evenly: sell part of it in September, then sell another part in October. In this way, you cannot guarantee that the price you sell at is the highest, but it certainly will not be the lowest. Be sure to sell evenly; this way your risk is the smallest, and your loss should be the least.”
Experts explain that the price of every transaction will be calculated into the average price, so on the whole, if the transaction price is lower than the average price, it will certainly also pull down the average price. But for an individual, of course the higher the better, because the subsidy received will be greater. However, it is very difficult for us to judge exactly when the price will reach a high point, so adopting the method of selling evenly is the safest.