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US and China change cotton growing policies

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The US (the largest cotton exporter in 2012/13) and China (the largest cotton producer and consumer in 2012/13) have recently announced changes to their agricultural policies, including cotton, according to the International Cotton Advisory Committee (ICAC).

On February 7, 2014, President Obama signed the 2014 US Farm Bill into law. The Direct Payments, Countercyclical Payments and Average Crop Revenue Election (ACRE) programmes are repealed for all commodities and for upland cotton, replaced by the Stacked Income Protection Plan (STAX).

STAX provides premium subsidies to upland cotton producers to purchase insurance policies that cover shallow revenue losses - those below the level generally covered by standard crop insurance policies, said ICAC.

In late January, the Chinese government announced that it would be implementing a target price programme for cotton and soybeans. For cotton, the programme will be limited only to that grown in Xinjiang, said ICAC.

Due to the lack of support for cotton grown in the inner provinces of China and lack of details concerning the new policy, the area outside of Xinjiang is expected to decline in 2014/15 and China’s overall area is expected to decline by 9% from last season to 4.2 million hectares, predicted ICAC.

The Chinese government has not yet said what the official target price for cotton will be but has stated that it will take into account both the domestic price, which for the last few years has been pushed upward due to its state reserve policy and the international price for cotton. It has also not announced how it will handle the significant stock that it already holds, but the Secretariat expects that it will aim for a slow controlled release.

This month, harvesting will be underway in the Southern Hemisphere while planting will take place in many countries in the Northern Hemisphere. In 2013/14, world area is estimated at 33.1 million hectares and is expected to remain fairly stable in 2014/15 at 33 million hectares, said ICAC.

World production is forecast to be 25.7 million tons in 2013/14, a fall of 4% from last season, and is expected to fall again in 2014/15 by 1% to 25.3 million tons. World cotton mill use is projected to rise by 1% this season to 23.6 million tons and by 3.5% in 2014/15 to 24.4 million tons due to continued economic growth in Asia, where much of the cotton consumption takes place.

In 2013/14, world ending stocks are forecast to be 19.9 million tons, more than two million tons higher than last season and in 2014/15 world ending stocks are forecast to rise for another season to 20.8 million tons as production is expected to exceed consumption for the fifth season.

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