Cotton Industry in transition

In January, Xinjiang was dry and cold, and the local cotton market was as deserted as the weather. "it fell!" Many cotton farmers describe the situation of seed cotton in this way. In the market, most seed cotton acquisitions have stopped, only individual cotton enterprises have acquired, and the price is also lower. "the demand of downstream textile enterprises is reduced, so we naturally dare not buy it." A cotton enterprise buyer said.

The cotton target price policy has been implemented for one year, and when the old and new policies are alternating, the cotton industry is undergoing changes.

Reality: to sell or not to sell? That's a problem.

The reporter learned from the China Cotton Association that as of mid-January, the sale of seed cotton in Xinjiang had been completed by more than 90%, but some cotton farmers had not yet sold out. On the 13th, the mainstream price of seed cotton in southern Xinjiang was 4.0-5.0 yuan / kg, down nearly 1.0 yuan / kg from the middle of last month.

In Xiajin County, Dezhou, Shandong Province, Lao Zhang, a cotton farmer, believes that it is a "big sale" that has not been seen in 10 years. Compared with the previous year, one kilogram of seed cotton has dropped by three yuan. Due to the weather, the output this year is not high, according to the normal price should be higher, on the contrary, the low price has not yet been collected. In the past, cotton sellers were waiting on the ground during the cotton harvest season.

This is the first year for the state to abolish the temporary collection and reserve policy and implement the target price policy.

In April last year, with the approval of the State Council, the National Development and Reform Commission and other three ministries jointly released the target price of cotton for 2014, at 19800 yuan per ton.

According to the analysis of people in the industry, the current situation of "farmers do not want to sell and enterprises do not want to harvest" is because after the cancellation of the temporary cotton collection and storage policy, the price of new cotton is completely determined by the market. On the one hand, farmers' planting costs are high and the price is lower than expected, so they are naturally unwilling to sell; on the other hand, although domestic cotton prices have dropped, compared with international cotton prices, they are still at a high price, and cotton enterprises are still unwilling to harvest. Cotton expert Chen Manyun analysis, although the mainland has also introduced a subsidy policy, but cotton farmers are still in a state of not making money or losing money. The income of cotton farmers in the mainland may be even less in 2015 and 2016.

"Ginning mills that process cotton also face difficult choices. If you sell, there will be no profit; if you don't sell, what if you continue to fall in the later period? " Gao Fang, executive vice president of the China Cotton Association, believes that some cotton enterprises have adopted a wait-and-see attitude towards the current cotton market.

At the Tsinghua Forum on Agriculture, Countryside and Farmers 2015, du Ying, counsellor of the State Council and former deputy director of the National Development and Reform Commission, said that the pilot project of direct subsidy for cotton target prices implemented in 2014 will not be expanded in 2015 and will still be piloted within the original scope. The reason for this is that the government wants cotton cultivation to be concentrated from the Huang-Huai-Hai producing area to Xinjiang.

Industry insiders believe that the purpose of the target price reform is not only to let the market decide, but also to make both cotton farmers and processing enterprises profit.This change is bound to change farmers' traditional concept of production and management. it will also change the way of product pricing, subsidies, and so on. Therefore, there is a process to adapt to the policy, and various detailed rules and supporting measures should be constantly improved in practice.

Cotton farmers: how much and how to distribute the subsidy is the key

According to the implementation Plan for the pilot work of Cotton Target Price Reform in Xinjiang, the target price is 19800 yuan per ton, and the subsidy method is 40%, that is, 60% of the central subsidy funds are subsidized according to the actual sown area and 40% according to the actual seed cotton sales volume. The implementation of this policy has caused great repercussions in the industry, and most people in the industry believe that this new policy means that the government will no longer directly intervene in cotton prices, and the pattern of domestic cotton prices determined by previous collection and storage prices, selling storage prices, and import prices is beginning to be broken.

Gao Fang believes that the overall progress of the target price policy in Xinjiang is relatively smooth, and the market pricing mechanism has begun to play a role. However, after the implementation of cotton acquisition, sales and subsidies in Xinjiang in 2014, the problems existing in the reform have also emerged. "it takes a huge labor cost to check the cotton area, and there are uncertainties in the verification of the quantity sold." Analysis of Li Wei, an expert in cotton industry.

The subsidy given by the central finance to the major cotton-producing provinces is based on the cotton output determined by the National Bureau of Statistics, and the subsidy method is independently decided by each province, which can choose to subsidize according to area or output, and the subsidy funds are required to be managed by special accounts, closed operation, and earmarked for special funds. shall not be reserved, occupied or misappropriated to ensure that subsidies are implemented in the hands of cotton farmers.

At present, the relevant government departments are arranging the subsidy distribution work in the later stage. At the press briefing on the pilot work of cotton target price reform held on December 23, 2014, Hu Fangyi, deputy director of the Economic and Construction Department of the Department of Finance of Xinjiang Autonomous region, told the media that the National Development and Reform Commission and the Ministry of Finance were studying and formulating cotton subsidy standards. cotton area subsidy standards and delivery volume subsidy standards will be announced in January and February 2015.

With the approach of the distribution time of cotton target price subsidies in Xinjiang, the progress and amount of follow-up subsidies have attracted much attention. Cotton farmers generally expect to get full subsidies as soon as possible. Gao Fang said: whether in Xinjiang or the mainland, the key to how to send and how much in the end is that it can be fully implemented in the hands of cotton farmers and does not give opportunities for fraudulent compensation in illegal operations, so that the cotton target price subsidy policy will continue to operate healthily.

Market: it is up to textile enterprises to decide whether to buy or who to buy.

In recent years, domestic cotton prices have remained high for a long time, and downstream textile enterprises have fallen into difficulties under the multiple attacks of high cotton prices and declining orders. After the implementation of the cotton target price policy in 2014, the price will be determined by market supply and demand, and the price gap between domestic and foreign cotton will gradually narrow. Will the cotton market demand improve in 2015? Yang Shibin, assistant president of the China Textile Industry Federation and president of the Knitting Industry Association, believes that in 2015, the driving force for enterprises to replenish the stock has increased, and the market demand has increased. Cotton textile enterprises are expected to usher in a reversal of difficulties and enhance their international competitiveness.

Yang Shibin said: in the past, the cotton collection and storage policy was to increase the income of cotton farmers and stabilize cotton market prices, but the state collected 98% of the country's cotton at 20400 yuan per ton, and textile enterprises had to buy national cotton reserves at a high price. Even if the national cotton reserve is sold to enterprises at 17250 yuan per ton, it is still the highest price in the world. Since October 2014, in addition to the sharp decline in raw material costs, textile enterprises have been most impressed by the substantial improvement in cotton quality. "Textile enterprises directly dock with cotton enterprises and cotton merchants, and there is more room for choice. It is entirely up to the textile enterprises to decide whether or not to buy cotton of what quality."

Yang Shibin believes that during the three-year temporary collection and storage period, cotton farmers paid more attention to cotton production, resulting in a significant decline in the quality of domestic cotton, especially cotton in Xinjiang, and some gin mills mixed some low-grade cotton with high-grade cotton in order to increase their reserves, thus lowering the quality of high-grade cotton, and cotton quality has become the primary concern of textile enterprises. "because cotton used by textile enterprises, in addition to a small amount of imported cotton, most of them have to buy national cotton reserves through auction. At present, upstream cotton farmers and gin mills consciously grade cotton in order to improve efficiency in the process of selling and processing cotton, which is conducive to the normal development of the entire cotton industry chain in the long run. "

Future: how to digest tens of millions of tons of national cotton reserves, affecting the trend of cotton prices

According to the investigation and analysis of professionals in the industry, the scale of domestic cotton reserves is more than 10 million tons, and the huge inventory makes upstream and downstream enterprises have to worry-- the domestic annual cotton demand is 6.5 million-7.5 million tons, and the supply is still significantly greater than the demand in 2015. Some enterprises compare the national cotton reserve to a ticking time bomb, once it explodes, the lethality to textile enterprises will be fatal.

"the national temporary cotton collection and storage policy did play a role in protecting the interests of farmers, and at that time, the state's collection and storage also had the meaning of copying the bottom, and then the collection and storage policy changed, making it difficult to get out of the warehouse now." Yang Shibin believes that the stock of cotton now collected and stored has become a hot potato.

According to statistics, as of January 9, the total amount of cotton processing in Xinjiang is more than 4.09 million tons, and the market predicts that the cotton output in Xinjiang this year may exceed 4.2 million tons, or even reach 4.5 million tons, exceeding the previous market expectation of about 4 million tons of cotton production in Xinjiang.

"Cotton consumption has not improved significantly this year, and when, at what price, and at what pace, will affect the trend of domestic cotton prices." Yang Shibin said.