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Cotton Soybean Purchase Mechanism to be Scrapped

03 January 2014

China plans to discontinue its cotton and soybean purchasing and storage mechanism soon and offer direct subsidies to farmers instead.

Finance Minister Lou Jiwei said that the Chinese government will begin trials soon for the introduction of subsidies for farmers, but he didn't give a definite timescale for the change in policy, according to the Xinhua News Agency.

In 2008 and 2011, the Chinese government introduced a policy for both soybean and cotton prices to ensure a fair income for farmers. However, fixed cotton purchase prices have created a gap between international and domestic prices and pushed the government to reserve more cotton every year.

Cotton prices have increased about 12 percent on the world market this year and the nation's dependence on soybean imports has surged at the same time. Both the market and farmers appear likely to welcome the end of the purchasing and storage mechanism at some point.

China purchased and preserved 10 million metric tons of cotton over the past two years, about 60 percent of international stocks. The nation currently has between 4 and 5 million tons of soybeans in storage.

TheCropSite News Desk

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