CCA is Interviewed on Hot Cotton Issues by

Source:China Cotton Association  Date: 01/February/2013

The 2012/13 season is the second consecutive year in which China implements provisional cotton reserve policy. It plays an active role in protecting the growers’ interests, and stabilizes the market. Recently, both the whole industry and global market all pay utmost attention to the upcoming new reserve proposal for next season. With these concerns, interviewed related leader from China Cotton Association (CCA). By January 22, the accumulated reserve of this season has hit 5.83 million ton, accounting for 85% of cotton production as expected. It is a new record in history. The reserve policy has deeply influenced the business in 2012. How do CCA evaluate the reserve policy and its effect?
CCA: in 2012, we have a bumper harvest in cotton, while market remains depressed and the industry is trapped by the unbalance between domestic and global markets. In order to protect the farmers and stabilize the market, the government activates the provisional reserve again after 2011. Since the beginning of new season in last September, the reserve has gradually accumulated 5.83 million ton. Both the amount and strength are unprecedented. The positive effects are obvious: growers get higher price for their production of cotton; cotton prices avoid falling excessively and stable the confidence of the business. In 2012, comparing with the sharp fall of international cotton prices by 42% down, the domestic price dropped by 20%. And spot prices remained relatively stable. In Xinjiang, the average and general cotton output increased, which also led a growth of the total value and economic benefits. we all know that the reserve policy plays an important role in protecting the interests of cotton growers and supporting market prices. There are still other opinions, especially from international market, questioning whether an intension involved by China to manipulate the market. How about CCA’s comment?
CCA: Since 2011, the reserve policies effectively protected farmers ' interests and ensured market stability, which also release the fluctuation pressure of international market. However, we also heard some interpretation of the policies that the government intends to control the world markets with its great inventory. This is a misreading of China's cotton interim purchasing policy. China has a leading role in both cotton production and consumption. It must give priorities to both farmers ' interests and sufficient output. The main cotton production countries have no difference on this point. The reserve policy, launched as a contingency plan at year beginning, is aiming at resolving periodic oversupply. The governmental agencies buy in the cotton in downturn market and sell when lacking of it, without depressing the normal market price. But this round of recession has unexpected long duration and negative effects unwilling to see by all parties. Such situation forced the policy handling temporary purchasing task to hold season-long market pressure. The pressure is not limited in available fund and storage, but also gathered from the strike of import price, market mechanism, and textile tolerance. from the long term, do you think the reserve policy need to be fixed? And any recommendation on that?
China cotton Association: All things have two sides. Considering the current international and domestic economic situation and the need to coordinate all parties’ interests in the business, it is really important to conduct further study on how to improve the policy. Neglecting any part on the cotton industrial chain will cause serious damage. From the long term of view, there is an urgent need to build a sustainable development mechanism for the industry, covering agricultural and industrial needs, upstream and downstream of the industry, and balancing the international and domestic markets. There are recommendations such as establishing direct subsidy policy as fundamental protection to growers, setting supporting policies for quality cotton base in Xinjiang, involving commercial inventory as means of macro-regulation and so on. All these suggestions from the cotton industry have to be examined by the government in the whole situation of economy. They also need to find their own feasible plans. The breeding time of this year is around the corner, farmers already take move on seed and land preparation. 2013 Document NO.1 of the Central Government clearly announces to guarantee the supply of major agricultural products, and start the reserve of key agricultural products accordingly. We believe the new annual cotton policy will still give priority to protecting farmers ' interests.

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