China'S Cotton Policy Has Been Hit By The Bumper Harvest Of American Cotton.

Dealing with excess cotton reserves:

China is now worried about surplus cotton reserves. Over the past three years, the stock of China's reserve cotton has been enough to supply domestic textile mills for two years. The government must gradually sell excess cotton, and at the same time, it must avoid significantly reducing cotton prices, thus causing Chinese farmers to stop planting cotton.

Action, quantity, time and price become important problems. Old cotton stored in storage may become brittle after long storage. It is not easy to spin yarn or cause dyeing problems. Adulteration and adulteration are all causing concern about the quality of cotton reserves.

China says that according to the terms of negotiations in the WTO accession, China must allow domestic textile enterprises to import 894 thousand tons of cotton every year.

Traditionally, in order to force textile mills to buy domestic cotton, China's central planning department would postpone the issuance of import quotas to textile enterprises for a period of time.

If import quota is low enough and the international cotton price is low enough, the quota free import will still be profitable after paying 40% of the import tax, so Chinese textile enterprises may still import cotton without quotas. The current price is in such a situation, which may further deteriorate in the future, making import quotas meaningless.

In 2013, China had hinted that it planned to change the traditional reserve system and replace it with a similar farmer subsidy system in the US.

In view of the cost of the cotton reserve policy, China has adjusted the cotton purchase and storage policy to direct subsidies to cotton farmers in Xinjiang. The NDRC pointed out that besides the pilot areas in Xinjiang, there are also the main producing areas of the Yangtze River and the the Yellow River River Basin, and the state will also give appropriate subsidies.

But now this principle has been fixed by the State Council, how to make up and how much will be released by the Ministry of finance, and it is not clear yet. Cotton growers and cotton enterprises have different responses.

Because cotton production is reduced and labor costs are rising, cotton farmers believe that the purchase price of seed cotton should be more than 8 yuan per kilogram before they are guaranteed. If the selling price is low, even if cotton subsidies are available, cotton growers will still have a slight profit for cotton farmers, or even lose their profits. Cotton farmers, on the one hand, formally buy prices at cotton mills. On the other hand, Cotton Subsidy procedures are cumbersome. Most cotton growers are in a fog and wait for the government to declare details.