Cotton subsidy may affect enthusiasm of farmers in China

27 Feb '14

2 min read

The implementation of cotton subsidies by the Chinese Government in place of the temporary purchase and storage policy may mar the enthusiasm of farmers towards growing cotton, according to experts.

The Chinese Government has already started implementing a subsidy of 380 yuan per mu (1 mu = 0.067 hectares) on a pilot basis in the main cotton growing region of Xinjiang.

After the implementation of the national subsidy policy, the price of cotton will be market-driven, theoretically breaking the past policy of temporary purchase and storage. This is expected to significantly bring down spot cotton market prices, and ease the problem of high raw material prices faced by the domestic textile industry.

At present, the international cotton market is oversupplied, and with China’s implementation of cotton subsidies, the difference in the prices of domestic and imported cotton would reduce, thus enhancing the international competitiveness of the Chinese domestic textile enterprises.

However, there is also a downside to the cotton subsidy policy, as it may affect the enthusiasm of cotton farmers towards growing the crop. During the years of implementation of the State Reserve Cotton policy, farmers received price of around 7 yuan/kg, and majority of them earned well. But, with the implementation of the subsidy policy, cotton growers would worry about the decline in cotton prices, which may result in loss as well.

Actually, the purchase price of cotton plays a decisive role in growing the crop. The cost of growing cotton includes the increasing cost of labour, seeds, fertilizer, irrigation, machinery, etc. which cannot be avoided. Added to this, there is problem of cotton yields. After three or four successful years of growing cotton, fields face serious pest attack. While the average yield is about 330 kg/mu, there are several fields where the yield is around 100 kg/mu.

Currently, the cost of growing cotton works out to about 2,000 yuan/mu, and the subsidy of 380 yuan/mu can only meet a limited burden.

Fibre2fashion News Desk - India

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