Cotton target price returns to the market, cotton planting is guaranteed and highly profitable

Currently, the Turpan region of Xinjiang has fully begun purchasing cotton. This year's cotton purchasing differs somewhat from previous years, with monitoring of cotton prices intensified in many parts of Xinjiang, in order to ensure the steady progress of the pilot reform of the cotton target price. According to the requirements of this year's No. 1 Central Document, the National Development and Reform Commission, the Ministry of Finance and the Ministry of Agriculture launched the 2014 pilot reform of the cotton target price in Xinjiang, with the 2014 cotton target price set at 19,800 yuan per ton.

Cotton planting is guaranteed and highly profitable

In Jirgelet Township, Wusu City, Xinjiang, cotton farmer Liu Qi planted more than 70 mu of cotton fields, and fellow farmers in the same village also planted between 20 mu and 40 mu of cotton fields each. Liu Qi told the Economic Daily reporter that he had long heard that this year it had changed to a target price subsidy. With national policy as a backstop, cotton planting is guaranteed and highly profitable, so everyone planted as they should, and cotton farmers' enthusiasm for planting and tending the crop remains high.

After the announcement of the end of the cotton temporary storage policy, cotton planting area shrank in many regions. The reporter recently learned from the Ministry of Agriculture that, because the cotton area in the interior declined considerably, the cotton region of the Yangtze River basin fell by about 12.1% and that of the Yellow River basin by about 14.5%, and this year's national cotton planting area is expected to fall by 8.7% from last year.

However, driven by the target price policy, the cotton region of Xinjiang did not see a sharp decline in planting area, and cotton farmers' enthusiasm for planting and carefully tending cotton remained high. According to the relevant person in charge of the Crop Production Management Office of the Xinjiang Department of Agriculture, Xinjiang has carried out verification of cotton planting area, and judging from the area verified so far, not counting the Production and Construction Corps, the cotton planting area in the localities alone increased by more than 4 million mu. This is due partly to the stimulus of the subsidy policy and partly to the fact that, in order to obtain subsidies, some concealed areas “surfaced”, which also increased the area.

A relevant person from the National Development and Reform Commission said that after the cotton target price policy is implemented, producers sell cotton at market prices. When the market price is lower than the target price, the state grants subsidies to producers in the pilot areas based on the price difference between the target price and the market price and on factors such as planting area and output; when the market price is higher than the target price, the state does not issue subsidies. The target price is determined on the basis of production costs plus basic returns. This year's cotton target price of 19,800 yuan per ton can compensate for cotton production costs in the pilot areas and ensure that farmers obtain basic returns.

Actual cotton planting area needs verification

Because this major change in cotton price policy involves a major adjustment of the interests of all cotton industry players, the Xinjiang Uygur Autonomous Region and the Xinjiang Production and Construction Corps have been very cautious about implementing the subsidy policy, setting up a leading group for the pilot reform of the cotton target price, with the autonomous region's Development and Reform Commission taking the lead in forming multiple research teams to conduct in-depth research in northern and southern Xinjiang.

Since June, agricultural departments in Awat, Xayar, Kalpin, Wensu, Kuqa and other places in Aksu, Xinjiang, have begun verifying the actual cotton planting area. Tang Yiwu, director of the Crop Production Management Office of the Xinjiang Department of Agriculture, told reporters that verifying the planting area lays the foundation for the smooth implementation of the target price subsidy. “Whether subsidies are based on area or on output, they are related to area. To pay subsidies into the hands of cotton-growing farmers, the area must be verified.” Tang Yiwu said.

Wang Li, director of the Cotton Economic Research Center of Shihezi University in Xinjiang, said that cotton subsidies are generally paid in two ways: one is subsidizing by area, and the other is subsidizing by output. Area subsidies are universal, available as long as one plants, while output subsidies are paid according to production results, with more output bringing more subsidy. Subsidizing by area is slightly unfair, but relatively easy to operate. Subsidizing by output looks fair, but is more difficult to operate.

It is understood that the specific plan for the 2014 Xinjiang cotton target price subsidy has already been submitted to the relevant national departments and is currently awaiting approval for implementation.

Helps cotton prices return to the market

The temporary storage policy played a certain positive role in protecting the interests of domestic cotton farmers and safeguarding the development of the entire cotton industry. But in practice, it later emerged that when the domestic storage price was far higher than global and domestic cotton market prices, more than 90% of the season's domestic new cotton flowed into the state treasury, leaving no cotton to be found on the market, with dealers unable to profit and textile enterprises also struggling.

Lan Haitao, a researcher at the Academy of Macroeconomic Research of the National Development and Reform Commission, said that the current important agricultural product price support policies, which are based on low cost and take the form of the government entrusting state-owned enterprises to directly purchase and store, appearing as minimum purchase prices and temporary storage, have increasingly shown their drawbacks and are difficult to adapt to the competitive environment for domestic and foreign agricultural products against the backdrop of globalization, making it necessary to adopt a target price reform centered on direct subsidies for price differences to replace the current important agricultural product price support policies.

Wang Sishe, president of Shandong Dezhou Hengfeng Textile Co., Ltd., said, “Enterprises that cannot bear the price gap of more than 4,000 yuan per ton between domestic and foreign cotton markets have had their competitiveness in export products affected. Now the state has adjusted industrial policy in a timely manner, the domestic and foreign price gap will narrow, and the cotton industry will return to its market attributes, which is conducive to the long-term development of the industry.”

Wang Li said that the Xinjiang cotton target price subsidy plan starts from the perspective of benefiting the entire industrial chain, subsidizing from the source. Not only do farmers benefit, but cotton prices also return to the market, and the cotton spinning and garment industries will also benefit from lower raw material prices, helping the cotton spinning industrial chain escape its difficulties. This is of great significance for safeguarding the income of Xinjiang's 2.5 million cotton farmers and increasing the vitality of Xinjiang's textile enterprises.