With a surplus of cotton and falling prices, Chinese officials have cut their target price for this year's cotton crop and are urging farmers in the major production region to shift cotton acreage to wheat or hay.
The 2015 target price for cotton in Xinjiang Autonomous Region has been set at 19,100 yuan/metric ton. This is the target for the crop to be planted this spring and harvested in fall of 2015.
The subsidy is based on the difference between the target price and the market price. As of April 3, 2015, market prices for cotton lint in Xinjiang ranged from 12,950 to 14,200 yuan--depending on the grade--far below the target price.
The target price for the 2014 Xinjiang cotton crop was higher, at 19,800 yuan. The subsidy for the 2014 crop has just been distributed and totaled 450.5 yuan per mu (about $441 per acre).
Agricultural officials in Xinjiang say the target price pilot program allows market supply and demand to be the main guide for setting the cotton price. However, the officials are giving the market some assistance by issuing a guidance plan calling for cotton farmers to reduce cotton area planted this spring by 4,665,000 mu (769,000 acres). They recommend shifting land to spring wheat or hay in low-yielding or drought-prone regions.
The guidance appears to be an implementation of a structural adjustment campaign launched by the Ministry of Agriculture earlier this year. According to the communist party secretary of Xinjiang's agriculture department, the "temporary reserve" policy that supported cotton prices during 2011-2013 "stabilized" cotton area but it kept some low-yielding areas in production. Now they want to "improve" the crop structure in the region.
The party secretary said farmers giving up cotton (and presumably giving up the fat subsidy) have two choices: plant spring wheat or hay. Those who plant spring wheat are assured they will get the "general input subsidy" and "improved seed" subsidy for wheat plus a subsidy for water-conserving irrigation. The shift to hay is part of a plan to develop a hay-livestock industry (this was an emphasis of the Ministry's structural adjustment plan). Xinjiang officials plan to increase area planted in hay by 10 million mu (1.65 million acres) over five years. A detailed plan for the hay industry is in preparation.