On January 19th China released policy documents confirming that the country will end its controversial stockpiling of soy and cotton in 2014 and will shift to a policy of paying subsidies to farmers instead. For several years China has stockpiled soy and cotton to encourage production, however the plan failed to generate planting while it did increase domestic prices above international markets necessitating more imports. Although the announcement did not note details on the timing of the shift or the size of the subsidies being offered, the changes are expected before harvest in the third quarter 2014 and it did state that the subsidies will be based on a target price much like the system used in the U.S. Global cotton prices increased 12% in 2013 and by the end of July 2014 China’s stockpile of cotton is expected to reach more than 12 million tons or 60% of global stocks. The releasing of these stocks could put pressure on global cotton prices as China’s demand for imports lessens. Soy will likely be less affected by the policy shift as China’s crushers are largely depended in imports. Some experts believe that if the cotton subsidies are not large enough, it will curb production even further and continue to drive up imports. China will still continue to stockpile rapeseed, corn, and sugar, and will offer supported prices for rice and wheat.
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