What Are The Differences In Cotton Policy Between China And The United States?

After the huge fluctuations in 2010/2011, the country began to increase its strength.

The regulation of the market, the policy of reserve and reserve and the control of quotas make cotton prices go into a narrow range.

According to the relevant policy design of cotton market reform, the state regulation means are mainly manifested in two aspects: one is to mediate the market through special reserves, that is, to regulate market supply and demand through the system of collecting and throwing reserve; the two is to regulate the supply and demand of domestic market through the use of international cotton market resources through the net export trade policy.

China's cotton reserve system

Cotton is an important material related to the national economy and the people's livelihood. In the planned economy era, the purchase and sale were implemented. During the "95" period, the cotton market reform was put forward. However, it was not until 2001 that the price of cotton and its selling price were gradually monopolized from the monopoly of the past to further deepen the reform of the cotton circulation system.

After the marketization reform, the mode of cotton trading has gradually changed from the single state purchase and distribution to spot trading, electronic matchmaking and regional cotton trading market.

The listing of cotton futures in Zhengshang in June 2004 is an important sign of cotton entering the market.

Since entering the market reform, the state has constantly balanced the supply and demand of the market by storing and storing reserve cotton, old cotton and exported cotton, but there has not been normalization.

Since 2011, approved by the State Council, the measures to implement temporary purchasing and storage policy in main production areas will be normalized, and the purchase and storage price will be announced ahead of schedule before new flower listing.

At the same time, according to market demand, cotton can be put into storage in accordance with government arrangements to stabilize cotton production, protect cotton farmers' interests, and ensure the needs of cotton enterprises.

Us Cotton Subsidy Policy

The fundamental purpose of the agricultural protection policy in the United States is to prevent "cheap grain hurts the peasants".

According to the 2002 agricultural bill, the US government's subsidy to cotton includes three parts: production subsidies, sales subsidies and trade subsidies, among which cotton producers are production subsidies (including direct subsidies and anti crisis subsidies) and sales subsidies.

The adjustment of production subsidies and sales subsidies will directly affect the planting area of cotton in the United States.

1. production subsidies

Subsidies for cotton production in the United States include direct subsidies and counter cyclical subsidies.

In 2002, the agricultural bill established a fixed direct subsidy system for cotton farmers, which is not linked to the production and prices of agricultural products. The government determined the area and yield basis of the crops in advance for the farmers willing to participate in the plan, and fixed a direct subsidy rate for each subsidized commodity to calculate the direct subsidy to farmers. The direct subsidy for cotton was 6.67 cents / pound.

Direct subsidy = subsidy rate * subsidized area * subsidized single production (subsidized area = basal planting area * 85%)

Anti cycle subsidy is a kind of productive protective subsidy which is started when the effective price is lower than the target price, in which the target price is the minimum protection price stipulated in the agricultural act.

When the actual price of agricultural products is lower than the target price set by the government, the government provides countercyclical subsidies to farmers.

The specific payment time is that the farmers can get the upper limit of 35% of the planned payment in October after harvest. They will be paid no more than 70% of the payment in February of next year, and will settle accounts after the 12 months' marketing and pportation.

Anti crisis subsidy = target price - effective price

In the agricultural law, the target price level of all kinds of subsidized agricultural products is clearly stipulated. The definition of effective price is: when the market price is higher than the loan price, the effective price equals the sum of the national average market price and the direct subsidy; when the market price is lower than the loan price, the effective price is equal to the sum of the loan price and the direct subsidy.

When the sum of the national average market price and the direct subsidy is equal to or greater than the target price, no countercyclical payment is made.

For example, the target price of upland cotton is 72.4 cents / pound, and the effective price is the sum of the direct subsidy rate and the higher average price of the United States or the CCC benchmark price of the upland cotton.

2. sales subsidies

According to the 2002 agriculture act, cotton is included in the "subsidized commodities" covered by the commodity subsidy clause. The government provides "loan differential subsidy" to the government, that is to say, the "loan price" is used in advance (using the US dollar / bushels as the unit of measurement, which is equivalent to the "lowest protection price" set by the government for farmers, which means the amount of loans that each unit of agricultural products can be secured from the state).

The farm owners who participated in the government support plan store the processed lint in the warehouse identified by the government as collateral. According to the "loan price" stipulated by the government (51.92 cents / pound, equivalent to 453.33 yuan / load), apply for mortgage free recourse loan to the Agricultural Credit Corporation, that is, CCC loan, the term of the loan is 9 months, and the statutory interest rate is generally 5.5%.

The application for CCC loan is closed to May 31st every year.

If the market price is higher than the government's CCC loan price, cotton growers can sell and return the loan principal and interest in the market. If the market price is lower than the loan price, the cotton grower can give the cotton to the Commodity Credit Corp to deal with, give up its ownership, and do not have to repay the loan fund.

However, in the implementation of this policy, the market price is often lower than the loan price for a long time, resulting in a large backlog of Commodity Credit Corp stock.

In order to solve this contradiction, the government adopted a disguised measure, that is, when the market price is lower than the loan price, the cotton growers are encouraged to continue to sell in the market. For the part where the market price is lower than the loan price, the difference is subsidized by the government, which is called "loan differential subsidy".

The "loan differential subsidy" effectively fills the gap between the price of US agricultural products and the actual price of the international market, and has become a basic subsidy measure for the US government to agriculture.

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Comparison of cotton policy between China and America

By comparing and analyzing the current cotton policy in China and the United States, I think there are three main differences.

1. different policy objectives

The goal of our cotton policy is to prevent "grain cheap harm to agriculture" while taking into account other regulatory objectives, such as ensuring market supply, stabilizing price fluctuations, and even considering national security.

Compared with the US subsidy policy, China has more targets for cotton regulation.

2. different ways of means

Analysis of us Cotton Subsidy

The sales subsidies and counter cyclical subsidies in the market are equivalent to the government put a put option on cotton growers to ensure that cotton farmers can sell at least at a reasonable price (target price).

When the market price is low, the government makes up the difference, which is equivalent to the put option exercise; when the market price is high, the cotton grower has no right to sell directly to the market to get a high price.

China's cotton purchase and storage policy is that the government assigns enterprises to enter the market with the role of market participants and purchase or sell at the prices stipulated by the government.

At the time of takeover, the purchase price of the government is generally higher than the market price, which is an indirect subsidy for cotton farmers. When selling, cotton enterprises need auction, and the price obtained is relative to the market price. There is no difference subsidy.

3. government market position is different.

The executive agencies of the US agricultural policy are paid by the government's fiscal funds, no profit making tasks and no profit motive.

Whether subsidies need to be subsidized or not, how much subsidies should be subsidized depends on the fluctuation of market prices, and how the subsidies have been formulated in advance. The whole process of the government as an indirect participant in the cotton market is faced with cotton farmers.

The possible pfer of cotton property rights in sales subsidies occurs between farmers and credit companies, and the government does not participate in the pfer of property rights.

In the process of cotton throwing and storing in China, the government is faced with various participants in the market. The acquisition is cotton processing enterprises, and cotton is sold at the time of sale.

Enterprise.

In the process of policy implementation, the ownership of cotton is pferred between cotton processing enterprises -- reserve cotton companies and cotton textile enterprises.

Cotton reserve companies have both the role of policy repository and the role of traders, and inevitably form their own interest demands.

In addition, starting from the policy objective of stabilizing prices, natural reserve companies are required to buy low and sell high, which is the earnings of reserve companies.

In the cotton circulation market, the national cotton reserve company can get double benefits of warehousing and trade through the system of throwing and throwing.

Disputes over reserve policy

From the economic point of view, the system of collecting and throwing reserve is a kind of government regulation policy.

The cotton reserve system has a longer running time, and the effect is remarkable from the reform of cotton quality inspection system and the implementation of instrumented package inspection. This has promoted the market reform of cotton to a certain extent.

At the same time, through the change of storage standards, such as the purchase and storage of large cotton, also promoted the development of 400 cotton enterprises.

However, there has been some controversy over the past two years.

1. does it affect the efficiency of the cotton industry chain market?

In the cotton market, whether the government's reserve system is conducive to the operation of domestic cotton market is still a controversial issue.

A popular support for the role of the government is that the 2010/2011 cotton market has fallen sharply in the year of 2010/2011, but the operation of storage and storage has been carried out from 2008 to 2010.

In 2011 and 2012, the policy of selling and throwing reserve made cotton price enter the trend of the interval, and the fluctuation narrowed sharply.

2. market efficiency and fair choice

The purchase and storage policy should not only consider the "efficiency" of the market, but also involve the "fair" problem of the participants in the cotton market.

An important goal of the purchase and storage policy is to stabilize cotton growers' income from cotton planting.

In the case of a sharp fall in cotton prices, cotton farmers can sell their seed cotton at a higher price. The policy of purchasing and storing can be regarded as a subsidy to cotton farmers by the government.

However, cotton processing enterprises and cotton growers in China are not economic "communities". After processing, the ownership of cotton has changed. The direct beneficiaries of the purchase and storage policy are the cotton processing enterprises, rather than the cotton farmers. This indirect subsidy will inevitably result in a big discount on the policy results.

At the same time, the purchase and storage policy paid a high price to cotton growers and cotton processing enterprises, but it damaged the interests of cotton textile enterprises that could get low price cotton.

We must see that the system of receipt and storage must damage the interests of other market participants in protecting the interests of some market participants.

Of course,

The interests need to be protected. Under the existing reserve system, the government needs to better grasp the issue of "efficiency and fairness".