China says to scrap cotton, soy stockpiling in 2014
The subsidy will be based on a target price, according to the document, following a system similar to one used in the United States.
The government said it would "gradually build a system of target prices for agricultural products so that when the market price is high, low income consumers will be subsidised, while when the market price is lower than the target price, producers will be subsidised the difference, therefore guaranteeing farmers' income". It did not give further details on how the target price would be set.
"I don't think they will give very big subsidies. The government wants to encourage grain production not cotton production," said another trade source. "I think we will see total production drop when the planting statistics are revealed in March."
The changes are expected to be brought in prior to this year's harvest in the third quarter.
China views the financial support of its 700 million farmers as crucial for both its food supply and political stability, particularly in regions with large ethnic minorities such as Xinjiang, its main cotton-producing area, and southern Guangxi and Yunnan, the principal sugar provinces.
Details of the policy change were published in the "number one document", issued every January by the Central Committee of the Chinese Communist Party. The paper sets the country's policy priorities for the year, and has focused on rural matters every year since 2003.
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