Chinese officials have announced plans to initiate "target price" subsidy trials for cotton and soybeans in 2014, but no details have been announced for these complicated programs.
A Grain and Oils Market News article reports that the details for the cotton subsidy trial have been settled but discussions of the soybean policy are progressing slowly and no details will be announced until late in the year.
Industry insiders say the "target price" subsidy for cotton will be 380 yuan per mu (about $380 per acre), and it will only be offered to farms in the Xinjiang Production Corps. The Production Corps is a network of farms and communities throughout the Xinjiang region which has a separate administration from that of the autonomous region. Rumors say farmers in Xinjiang outside the production corps will not be included in the subsidy trial, but the matter of which localities will get subsidies seems to be still under debate.
A task force has been set up to discuss details of the soybean target price subsidy trial. Rumors say the subsidy will be set at 200 yuan per mu (about $200 per acre). The task force is chaired by Nie Zhenbang, a former head of the grain bureau. Other members are communist party secretaries from several third-tier universities, director of a research institute affiliated with the grain bureau, the director of the National Grain and Oils Information Center (also part of the grain bureau system), executives from the Dalian and Zhengzhou commodity exchanges, and an agricultural policy advisor to the State Council who has been a vocal advocate of the target price subsidy.
Both rumored subsidy amounts are much higher than current subsidies for rice and wheat which are approximately 100 yuan per mu. Another article posted today recommends the cotton subsidy be set no lower than the amount of the grain subsidy.
According to rumors, the soybean subsidy task force's progress has been slow and difficult. They don't plan to issue recommendations to the government until July or later. An official with the Heilongjiang soybean industry association says he has heard no details about the forthcoming subsidy program.
An analysis in September 2013 pointed out there are many difficulties in implementing cotton target price subsidies. Planted area fluctuates depending on the price, so how is the acreage base for the subsidy set? There are no records or other information on cotton producers. While the United States implements cotton programs for 20,000 farms, China has 40 million cotton farms. The article implied the subsidy would need to be much higher than grain subsidies because production costs are higher. Setting a high subsidy prior to planting could lead to a surge of production that will depress the price at harvest time.
On March 5, Premier Li Keqiang said the minimum prices for wheat and rice will be raised and temporary reserve programs for corn, rapeseed, and sugar will be continued. He omitted soybeans and cotton, suggesting that temporary reserve programs will not continue this year. This raises concerns that farmers will lose their enthusiasm for planting soybeans and cotton.
In a press conference on March 6, Minister of Agriculture Han Changfu pointed out that subsidies only account for 3 percent of Chinese farmers' income, much lower than the 40-percent subsidies he claims are received by farmers in the United States and Europe. Han said China has plenty of room to increase subsidies.
There seems to be an urgency to eliminate the temporary reserve for cotton for the benefit of textile companies. The "Number One Finance News" said the direct subsidy is needed in "the most difficult year for textile enterprises" facing high raw material prices. For people who worry that farmers in Shandong and Henan Provinces will not get subsidies, one commentator urged that the entire industry chain should be considered, i.e. the benefits to textile producers of relieving them of having to pay artificially high raw material prices.
Grain and Oils Market News notes the irony that China is deciding the details of new target subsidies copied from the Americans at the same time the United States is eliminating direct subsidies in its new farm bill.