On The Target Price Subsidy Policy

The target price subsidy policy has always been the focus of attention of the cotton industry. From the January 19, 2014 central document No.1, the target price system of agricultural products was first mentioned, and the target price of cotton was announced at 19800 yuan in April 5th. In September 17th, the Xinjiang and Xinjiang Corps issued the implementation plan of cotton target price reform in succession, marking the implementation of the pilot project of cotton target price.

The main reason for formulating cotton target price subsidy policy is that the problems faced by the policy of purchasing and storing at an unlimited high price for 3 consecutive years have become increasingly prominent.

First, the benefit distribution mechanism is not smooth, and cotton growers benefit less directly, and the cotton planting area still decreases year by year.

The two is temporary collection and storage of financial pressure and excessive management costs.

Over the past 3 years, the country has collected 15 million 950 thousand tons of cotton, accounting for more than 80% of the total output of cotton in 3 years, and cotton stocks at a height of 1200-1300 million tons, approaching 4 times the normal stock.

According to the calculation of 3 years cotton purchase price and outgoing price difference, storage fee, interest and so on, 1 tons of cotton finance should be subsidized by more than 2000 yuan.

Three, the internal and external cotton prices are seriously upside down, and the price difference is as high as 5000-6000 yuan, which adds pressure to the competition of textile products.

Under the influence of this price difference, some spinning enterprises were forced to flee south Asia to invest and build factories, and cotton yarn imports surged year by year (Nian Ping increased by 30%), cotton yarn imports in 2013 amounted to 2 million 100 thousand tons, while cotton yarn exports maintained a low level of about 500 thousand tons. In 2013, the export of cotton yarn was 520 thousand tons, which was only 1/4 of imports.

Therefore, in order to further improve the price formation mechanism of agricultural products, protect the basic income of cotton farmers and improve the competitiveness of textile enterprises, the direct subsidy policy of target prices is undoubtedly a good policy to replace the purchase and storage of agricultural products.

The target price subsidy is to further improve the cotton price formation mechanism, stabilize the cotton market, protect the basic income of cotton farmers, and make a policy of direct subsidy to cotton growers for the first time.

This policy has been tried only in the new Xinjiang autonomous region and the Xinjiang Corps this year.

From the detailed implementation rules of the Xinjiang and Xinjiang corps,

The basic content is formulated by the state to protect cotton farmers from obtaining basic earnings.

During the price period, when the market average price is lower than the target price, the state subsidize cotton growers; when the market price is higher than the target price, no subsidy is granted.

The main contents are as follows:

1, target price level.

Led by the national development and Reform Commission, it will be announced a year before planting.

The price of lint target was 19800 yuan / ton in 2014.

2, subsidy spreads.

Subsidy = target price - average price.

This does not refer to the difference between the actual seed price and the target price of a specific sale, but the difference between the average price of the Xinjiang autonomous region or the Xinjiang corps and the target price after conversion to lint.

3, the price period: the average sales price of 9-11 months per year.

4, the area and sales subsidy ratio: 64, that is, 60% of the central subsidy fund is subsidized by area, and 40% is subsidized by the actual seed cotton sale volume.

Area subsidy is on the one hand encouraging seed cotton, and on the other hand, it is to compensate for the loss of production.

The cotton area is applied to the declaration system, the township and county self check, the district and the spot check, and report to the level.

The quantity of seed cotton is determined by the number of invoices issued by the qualified cotton processing enterprises.

5, the allocation and payment of subsidy funds: before the end of December, the state calculated the total amount of subsidy funds according to the difference between target price and market price and Xinjiang cotton output surveyed by the National Bureau of statistics, and allocated the Xinjiang autonomous region and the production and Construction Corps separately.

By the end of January next year, the production subsidy fund will be paid to the basic farmers and agricultural production and operation units before the end of February next year.

The direct subsidy policy of target price has obviously changed with the policy of collecting and throwing, and has also had a strong response to the market.

From the comparative analysis of the actual effects of the 2 policies, we can see:

First of all, the object of subsidy has changed.

The cotton purchasing and storage policy can be directly subsidized by cotton business enterprises and subsidized cotton farmers indirectly by raising the purchase price.

In the process of purchasing and storage, cotton processing enterprises are more active, that is, when the market price is higher than the purchase and storage price, cotton enterprises can sell lint directly, otherwise, they will buy and store them in the national cotton trading market. Their storage and purchasing paths are: cotton farmers (seed cotton), cotton processing enterprises (lint), and storage to the national cotton trading market.

In the past 3 years, cotton enterprises which basically purchased cotton from the cotton farmers and met the quality requirements were basically handed over to the trading market.

In the past 3 years, the average price of cotton seed (cotton seed) and cotton (18500:19800), cotton 19200:20400, 19300:20400, subsidized price, storage price, and cotton price were purchased from cotton growers.

Therefore, under the system of collecting and storing, there is no risk in cotton business.

The target price policy makes direct subsidy to cotton farmers.

When the market price is higher than the target price, the cotton farmers' interests are guaranteed without subsidies. When the market price is lower than the target price, the subsidy amount is the target price, which is the average price of seed cotton and cotton lint.

Direct subsidy policy, cotton farmers' risk is greatly reduced, basic income is guaranteed, and risk is pferred to cotton business.

So this year cotton processing enterprise acquisition is very cautious.

Second, the direct subsidy policy accelerates prices to adapt to market changes and accelerate the narrowing of internal and external spreads.

The policy of dumping and storage was originally an effective way for the state to regulate and control the market. When the price of cotton was deviated from the market or the serious shortage of market resources, the state adopted the throwing and storing means to regulate and stabilize the cotton market.

However, in the past 3 years, due to large-scale storage and storage, there was no market available, and auction cotton became the main channel for textile enterprises to obtain cotton resources.

In the process of throwing and storing, the starting price is set up by the government, which naturally becomes the benchmark of the domestic and spot markets.

As the price of dumping and storage seriously deviates from the market, the inverted price of cotton is very prominent. The price difference generally reaches 4000-5000 yuan, and the highest price has reached 6000 yuan.

After the direct subsidy policy was announced, cotton prices adjusted to market changes and the price gap between inside and outside was speeded up.

Affected by the global economic environment and the supply and demand situation of cotton, the cotton market this year showed a rather weak overall and the international cotton price continued to run low.

However, under the influence of throwing and storing prices in the domestic market, cotton prices are still running smoothly at around 19300 yuan.

After the direct subsidy policy was announced, cotton prices fell twice.

First, in April of this year, the reserve price dropped from 18000 yuan to 17250 yuan, and spot cotton prices began to drop sharply, from 19300 yuan to 17500 yuan, and 1800 yuan in 1 months.

The two is in mid September this year, when announces the Xinjiang direct subsidy policy detailed rules and regulations, initially discovered that at that time Xinjiang seed cotton folded cotton price is about 14000 yuan, the spot and spot market cotton price once again slides sharply, only in late September dropped nearly 2000 yuan, dropped from 16800 yuan to 14800 yuan, the futures forward contract dropped to 13500 yuan.

At the same time, in order to encourage more textile enterprises to use domestic cotton, the NDRC announced that it would not issue import quotas next year.

After the news was released, the international cotton price was accelerated. The cotton in New York fell to 63 cents from 70 cents, 10% in 1 months, and the international cotton price dropped from 70 cents to 70 cents. Cotton prices both fell to the lowest level in 5 years.

At the same time, because of the drop in cotton prices both inside and outside, and the decline of cotton within cotton, the difference between inside and outside cotton price is reduced to about 1200-3700 yuan.

Third, from the actual operation in the past 1 months, the cotton parties concerned are very cautious.

First, the sale of cotton farmers in the mainland is not active, and the state subsidy policy is expected; two, the cotton processing enterprises determined to try to lower the purchasing price while avoiding excessive risks while avoiding the risk of takeovers. The three is that Xinjiang cotton merchants strive for a good price and cross regional sale, which brings uncertainties to the output identification. Four, the textile enterprises are facing the pressure of high price and low price of high price reserve cotton and frequent falling yarn prices. At the same time, the international cotton price has dropped to around 11000 yuan, and this year the seed cotton purchase price is still 14000 yuan higher than that of last year's 5000 yuan. Therefore, the cotton price is still on the sidelines, but the textile enterprises are welcome to the direct subsidy policy.

To sum up, direct subsidy policy is a good policy that is beneficial to cotton farmers, favorable and stable cotton planting area, favorable price formation mechanism, favorable to the stability of the cotton market, and conducive to the integration with the international market.

But it needs further improvement.

First, the operation is more complicated.

The identification of cotton planting area and output of cotton growers is particularly complicated, involving more departments and personnel.

The scale of Cotton Planting Farmers in Xinjiang is relatively large. If it is extended to the mainland, it will become more complicated.

Two, the minimum market price or maximum subsidy should be worked out.

In view of the fact that the target price subsidy policy is a small amount of subsidy, the minimum market price or maximum subsidy can be considered in order to prevent a fall in cotton prices due to subsidies.

When the price falls to this extent, the purchasing and storage policy is enabled.

We can not deny the policy of collecting and storing money blindly. The key is how to make good use of this policy.

During the financial crisis in 2008, when cotton prices fell all over the country and seriously hurt farmers, the state immediately adopted the measures of purchasing and storing, and the cotton price rebounded, which saved the market and safeguarded the interests of cotton farmers.

Three, cotton import mechanism should be effectively matched.

The gap between China's cotton production and demand is long. According to the normal year, China's imports of cotton are about 250-300 tons per year, and the import volume accounts for about 1/3 of the world's total imports. Therefore, China has an absolute say in the global cotton market.

If we control imports, we will have a greater impact on the global cotton market.

In September this year, the NDRC made bold remarks that it would not issue import quotas in principle next year. After the news was released, the international cotton price, which had been steadily recovering, continued to fall, falling to its lowest level in five years.

Therefore, after the implementation of the direct subsidy policy, matching the import mechanism with proper import and export is conducive to the organic integration of the internal and external cotton markets.

Do not set up a policy of non import because of high storage in 3 years.

Indeed, in the past 2 years, China's cotton stocks have reached a record high, nearly 2 times the annual capacity of the country, accounting for more than 58% of the total global inventory. If the global inventory after excluding China is equivalent to that of the normal year, China's high cotton stocks will also exert great pressure on the global cotton market.

This is caused by history and should not be borne solely by textile enterprises.

Four, we should promote the cotton direct subsidy policy in the mainland as soon as possible. We should make appropriate compensation this year, and do not cause harm to mainland cotton farmers because of the pilot projects in Xinjiang.