Direct supplement helps stabilize cotton supply in the mid-term

On April 5, 2014, the National Development and Reform Commission, the Ministry of Finance, and the Ministry of Agriculture jointly issued 2014 cotton target prices at 19,800 yuan per ton. According to the analysis, replacing the policy of purchasing and stockpiling with cotton target price subsidy policy will reduce the impact of cotton price fluctuations on the cotton planting area in Xinjiang, which will help stabilize supply, and the impact of the cotton market will be bearish in the medium term.

Under the temporary purchase and storage policy, the country generally announces the next year's closing storage price before the planting of new cotton (2-3 months), and accounts for the next year's seed cotton purchase price according to the storage and storage price. The processing enterprise deposit must provide the seed cotton acquisition certificate. If the purchase price of the seed cotton in the processing plant is lower than the nationally announced seed cotton acquisition guidance price, it is not allowed to deposit. Under the temporary collection and storage policy, the state guarantees the income of cotton farmers through processing and circulation. Due to the higher processing costs, the higher circulation costs of cotton are detrimental to textile companies.

In 2014/2015, the policy of replacing temporary purchases and storages and the policy of directly supplementing cotton target prices to be implemented will bypass the processing and circulation links and directly subsidize the difference between the target price and the market price to the cotton farmers who implement direct subsidies. The comprehensive income of cotton farmers is The sum of seed cotton sales price and the state's direct subsidies. As long as the processing plant determines the seed cotton acquisition cost based on the market price. The processing and distribution links do not assume the duty of “supporting the market”, and the circulation costs of the cotton market will be greatly reduced, which will help the textile cotton enterprises to reduce the cost of raw materials.

Although the country has recently determined that the target price for direct subsidies is 19,800 yuan/ton, but no detailed implementation details have been announced, the market is worried that the direct subsidies policy has invaded and deducted the actual implementation, which affects the actual income of farmers and their enthusiasm for planting. Great discount. It is reported that the state will adopt a weekly price monitoring method to formulate basic subsidy prices. Similar to grain subsidies, cotton farmers will be issued a one-off card and subsidies will be sent directly to cotton farmers. Specific policies are expected to be finalized by the end of April or early May.

To sum up, there are essential differences between the direct target price system for cotton and the temporary purchase and storage policy, which will be conducive to stabilizing the cotton planting area and cotton supply in Xinjiang, reducing the cost of cotton circulation and affecting the price of cotton. The mid-term pattern of cotton has not changed.