MUMBAI, April 19 (Commoditiescontrol):China's National Development and Reform Commission recently announced that the target price for cotton in Xinjiang will remain at 18,600 yuan per metric ton for the 2023-2025 period, the same as in the previous 2017-2022 period. The announcement also mentioned that the production of Xinjiang cotton would be subsidized with a fixed output of 5.1 million tons, taking into account recent cotton production in the region and local water and arable land resources. This has sparked discussions in the market, as the inspection volumes for 2022/23 Xinjiang cotton exceeded 6.13 million tons. Additionally, there are strong expectations for lower Xinjiang cotton planting areas in the 2023/24 .
The target price policy for Xinjiang cotton has been adjusted every three years since 2017. The general guidelines for the policy are to set a target price based on production costs and reasonable returns, and it is difficult for the target price to decline with higher production costs. The subsidized production ceiling for 2017-2019 was set at 85% of the average national output in 2012-2014, which equated to 5.44 million tons. In 2020-2022, there was no clear regulation on subsidized production, and in 2023-2025, the subsidy will be given to a fixed output of 5.1 million tons.
The policy aims to ensure the stability of Xinjiang cotton production and promote the withdrawal of sub-optimal cotton regions. However, Xinjiang's cotton production in 2018-2021 was around 5.1 million tons, so the region's subsidized production and actual production are similar.
Furthermore, the capacity of ginners and cotton yarn mills in China is higher than the country's cotton production, raising concerns about eliminating excess capacity during the harvest rush for seed cotton. Spinning mills can fulfil their demand for feedstock with imported cotton and other textile feedstock.
Aside from these concerns, Xinjiang cotton's target price also involves quality subsidies and the integration of the Xinjiang Production and Construction Corps (XPCC) and local Xinjiang outside XPCC.
(By Commoditiescontrol Bureau; +91-9820130172)
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