About IATP

The Institute for Agriculture and Trade Policy promotes resilient family farms, rural communities and ecosystems around the world through research and education, science and technology, and advocacy.

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China

June 09, 2008

Water, Water Everywhere - Part 2

IATP President Jim Harkness is blogging from China through June 14. (Due to internet access problems, Jim sent this blog via e-mail. I am posting it for him - Ben)

Of course, most of Shanghai’s (and China’s) water pollution is not as dramatic as a waste dump at the edge of a water source protection area. But runoff from agriculture is a major form of “non-point source” pollution. The highly intensive vegetable farming practiced here (often in plastic greenhouses, see below) exhausts the soil quickly, so huge amounts of fertilizer are used. And because appearance is so important for these crops, pesticide use is also high.

These are also thirsty crops, so irrigation is nearly universal. The state has traditionally organized irrigation. Much of the land around Shanghai was coastal marsh before being reclaimed for farming and urban development. Now it’s crisscrossed with canals. (See the Shanghai Co-op Watergate below)

Aquaculture requires even more water than vegetable production. With seafood-loving Shanghai nearby, this is a popular activity here. It's also highly polluting.

In my field visit with WWF Shanghai staff, we met a local entrepreneur who claims he will change all that. Allen Qian (in the red shirt below) has a background in fisheries and engineering. He claims to have developed a “green” production system for shrimp and other seafood, using no artificial growth stimulants and returning clean water to the canals that drain the site of his proposed development.

There was an aquaculture expert along with us, so I confess I couldn’t follow all the details of their technical discussion of waste disposal and stocking rates and water treatment, but construction was clearly moving right along. Mr. Qian pointed out several areas that will be artificial wetlands designed to filter organic waste from water as it flows through them. His enthusiasm about developing environmentally-sound production systems (there will also be “ecological” rice production at an adjacent site) was encouraging, given the rest of what we saw that day (see a more typical Shanghai Aquaculture site below).

What surprised me the most, however, was the degree to which his costs were being covered by the government. The infrastructure had all been built and maintained by local government, including roads and of course the canal system. His financing will be with a concessionary government loan, which is technically going to a co-operative that Mr. Qian is forming with locals. The land will be rented at a very generous rate from the local village government. And as we were going down the list of costs, I eventually got to the most important factor in his production operation, the priceless substance without which agriculture and aquaculture are unimaginable.

“Water? Oh, that’s free.”

—Ben Lilliston

June 07, 2008

Water, Water Everywhere

IATP President Jim Harkness is blogging from China through June 14. (Due to internet access problems, Jim sent this blog via e-mail. I am posting it for him - Ben)

My last job before joining IATP was at WWF China, (no, not the wrestling federation!) so while I was in Shanghai for the organic conference I gave WWF’s Shanghai office a call. After the obligatory evening of gossip and reminiscence, they offered to take me to the field with them for a day. The Shanghai office of WWF is very focused on water issues. I was interested to learn that they are looking at land use in the areas surrounding Shanghai’s drinking water source in the upper reaches of the Huangpu River. It had not occurred to me that the water source might be nearby, but they assured me that there are intake stations within an hour drive of the city center.

Sure enough, I found myself in front of the map shown below, which shows the borders and main features of the Upper Huangpu River Drinking Water Source Protected Area. This is where 80 percent of the water for Shanghai’s 20 million inhabitants comes from.

The sign is on the edge of the Protected Area, next to a bridge over a stream that flows into the Huangpu. The view downstream shows floating garbage and green scum that indicates high levels of organic pollutants.

Turning around after taking the last picture, I was entranced by this large, cheerful image of a green and prosperous Shanghai. The slogan is “Together Building a Civilized Home, Together Creating a Beautiful Future.” Note the clear water gushing from the fountain!

Behind the billboard, though, the scene was somewhat different.

I wanted some more pictures of the dump, but the potent blend of chemical and biological odors made it impossible to stand nearby for more than a minute.

Yesterday, China’s Environment Ministry released their estimates of pollution discharges nationwide. Some indicators actually declined for the first time, but the overall picture continues to worsen. Some digging into the Chinese reports shows that rural pollution in particular shows no sign of lessening, as more pesticides and chemical fertilizers run off of fields and massive volumes of animal waste are discharged from factory farms directly into waterways. 

Which brings us back to the challenge China faces in feeding its people. In their attempt to keep farm production ahead of population growth, China’s leaders borrowed the chemical-intensive agricultural approach of American industrial agriculture, instead of seeking to upgrade an indigenous farming system that had persisted for thousands of years. If they had known then the impact this approach would have on their land, water and farmers, I wonder whether they would have still made the same choice.

—Ben Lilliston

June 06, 2008

China’s Biggest Organic Store?

IATP President Jim Harkness is blogging from China through June 14. (Due to internet access problems, Jim sent this blog via e-mail. I am posting it for him - Ben)

Last fall when I was in China, I saw an item in the paper announcing the opening of the country’s biggest “organic food store” in Tianjin, with over 800 square meters of space. Well, that’s not exactly huge, but I figured that if it’s the biggest in a country of 1.4 billion, then it might be a better place than an organic exhibition to learn about how ordinary people feel about this sector. More specifically, I wanted to see for myself the price difference between organic and conventional foods in China.

With a population of around 15 million, Tianjin is another one of those gigantic Chinese cities that no one outside of the country has ever heard of. (In fact, there are over 180 cities here with over 1 million residents.) I was surprised to learn that the Yi Nong Da Supermarket was not located downtown, but in a “Development Zone” called Binhai, about 50 kilometers from the city center. This industrial suburb turned out to be huge though, with a million or so inhabitants, and the store seemed right in place in a commercial street adjacent to some high-density housing.

Despite the name on the sign, however, it took a while to find any organic food in the store. About four-fifths of the floor space was dedicated to instant noodles, Snickers, toothpaste and Chinese convenience store fare like shredded squid (regular, BBQ or Cool Ranch). Along the back wall, the produce section had a sign proclaiming, “Fresh Organic Vegetables,” but for 20 minutes or so none of the few customers ventured anywhere nearby. Finally, a construction worker came in and made a bee line for the bananas. I asked if they were organic bananas and he said they were.

Me:  Why are you buying them?

Him: They taste good.

Me: Aren’t they expensive?

Him: No.

Now we’re getting somewhere! If ordinary workers are willing to pay extra for organic food, then maybe there is hope for the domestic market. I followed up with questions about how often he shops here, whether his co-workers buy these products, etc, carefully recording his answers until a clerk came over and said, “The bananas aren’t organic.” In fact, when I started actually checking the labels I found that none of the produce was organic! The fruit was conventional and the vegetables were “Pollution Free” (wugonghai), a uniquely Chinese designation that seems to mean that no more than the recommended amounts of pesticides have been applied.

Since I didn’t have any organic products for my price comparison, I jotted down the prices of some pollution-free veggies. They seemed fairly reasonable, certainly not three times the cost of ordinary vegetables, but in my hour at the store I didn’t see anyone purchase even these less expensive products. The store manager said that usually there are more customers, and that about 20 percent of their customers buy pollution-free food regularly. To assure quality, Yi Ning grows its own vegetables on “bases” in several different provinces, but she said that it’s tough for them to compete because being in the suburbs, they have many vegetable farmers right nearby who claim that their goods are also pollution-free. I asked why she thinks more people don’t grow 100 percent organic, and she said: “If you don’t use fertilizers, they (vegetables) grow very slowly. Since people want to earn money quickly, they feel like they have to use some pesticides and fertilizers.”

From Yinong, I went to a nearby Tesco, one of the several big box stores competing in China’s retail market. The results of my survey are shown below. (The unit is Chinese yuan per kilogram, and there currently about 7 yuan in a U.S. dollar.)

No one seemed to be buying pollution-free veggies in Tesco either, but given their huge mark-up compared to both conventional and Yi Nong pollution free, it wasn’t too surprising. Despite not being a cost comparison with certified organics, this survey showed that the price differentials for “healthier” food are indeed much greater than the 20-30 percent found in U.S. or European markets. And the studious avoidance of these products by shoppers in both stores made it clear that the price difference is indeed a huge barrier to the development of a domestic organic market in China.

On my way out of Tesco, I passed people lined up to taste little spoonfuls of Skippy peanut butter being dispensed by a young woman in a mini-skirt, and was reminded of another big challenge for organics in China: marketing. At the BioFach exhibition, more than one vendor had complained that most people have no idea what organic means, so of course they aren’t willing to pay more for it.

—Ben Lilliston

June 04, 2008

Lessons from China on the Food Crisis

IATP President Jim Harkness is blogging from China through June 14. Due to internet access problems, Jim sent this blog via e-mail. I am posting it for him - Ben

Yesterday, IATP and the Rural Development Institute (RDI) of the Chinese Academy of Social Sciences held a workshop on agriculture and trade. Daryll Ray of the University of Tennessee’s Agricultural Policy Analysis Center and Li Guoqiang of RDI gave excellent presentations, followed by a lengthy and animated discussion that continued through lunch and into the afternoon. Daryll presented a history of U.S. farm policy, and laid out the basic economics of why certain policies succeed and others fail. Central to his argument is the notion that agricultural markets have a strong tendency to fail, and therefore require government action to buffer against volatility and guarantee food security.  He also used USDA data (with a strong disclaimer concerning its accuracy) to show that contrary to conventional wisdom, China’s increased demand for meat has not been a significant driver of the global food price crisis. He makes the same argument in a policy brief that you can find here.

The short version is this: meat consumption his indeed increased a lot in recent years, but instead of importing more grain (or meat) China has been releasing grain from its massive reserves onto national markets. China’s grain market, including its feed market, is therefore effectively insulated from international price fluctuations.

This is, of course, precisely the kind of “market-distorting government intervention” that the World Bank and IMF have argued against for decades. My friend Yoke Ling Chee of the Third World Network said after the workshop that she was sorry it wasn’t a panel at the World Food Crisis Summit in Rome. Instead, the world is being treated to the spectacle of World Bank President Robert Zoellick blaming poor country export bans for skyrocketing prices, bans put into place as a desperate measure in the face of a crisis the Bank helped create.

IATP's Carin Smaller is blogging from the Rome meeting this week on all the happenings at the food crisis summit.

—Ben Lilliston

June 01, 2008

When the Going Gets Tough...

IATP President Jim Harkness is blogging from China through June 14.

One of the big questions surrounding organic agriculture, wherever it is being discussed, is authenticity. And the farther away the food is coming from, the more questions are going to be raised. So who do we trust and how do we verify? There are clearly very different opinions, and some institutional tensions, even among the outwardly friendly participants at BioFach - the major organic conference I am attending in China.

The exhibition and conference are organized by a German company, NürnbergMesse, and the focus of much of the discussion is on exporting organics to Europe. But as I mentioned yesterday, more and more Chinese products are being turned away by EU customs inspectors. To turn this situation around and increase trust in Chinese products, Mr. Chuk Ng of Naturz Organics urged producers to pay more attention to farm management and exporters to improve transparency along the whole supply chain. 

A senior official from the China Organic Food Certification Center (COFCC) had a different idea. He suggested to the audience that China and ASEAN (Association of Southeast Asian Nations) should negotiate as a trading bloc to force Europe to recognize national standards in Asia as equivalent to EU organic standards. (I couldn’t help but think of a saying my friend Tom Nelson has painted on the wall of his bar in La Pointe, Wisconsin: “When the Going Gets Tough, Lower Your Standards!”) The mood was not improved by the next speaker, a German trade lawyer who explained in painstaking detail a set of new EU regulations (EC no. 83412007) that are likely to add more layers of cost and complexity to the export process.

But not all of the tension was between the Chinese and Europeans. Within China there is also continuing friction between the competing centers of organic certification, the Environment Ministry’s Organic Food Development Center (OFDC) and COFCC, which is affiliated with the Ministry of Agriculture. In the simplest terms, OFDC’s starting point is food safety and environmental health, whereas COFCC’s focus is on “scaling up” and promoting exports. In his remarks at the workshop, Dr. Li Xianjuan of COFCC stressed the fact that they are now certifying more enterprises than any other agency, and barely mentioned OFDC, which is affiliated with IFOAM (the International Federation of Organic Movements) and has a better reputation internationally.

Yu Kaijing of the OFDC then gave a talk entitled, “The Validity of Organic Certification in China,” in which he repeatedly charged that “the economic interests of some certifying bodies” are in conflict with their mission, which should be promoting ecological agriculture and food safety. And while he didn't actually nod toward the COFCC guys and waggle his eyebrows up and down, it was pretty clear who he had in mind.

—Jim Harkness

May 29, 2008

Organic Food in China

IATP President Jim Harkness is blogging from China through June 14.

After a restful overnight train ride down to Shanghai from Beijing, I was able to check into my hotel and still make it to the opening of the BioFach China 2008 International Organic Trade Fair and Conference.

There are over 300 exhibitors and the organizers expect 10,000 or more people to attend. The crowd today was mostly Chinese, many of them organic producers and people considering converting to organic. Lots of people were simply enjoying the free samples of organic everything: rice, dumplings, honey, walnuts, pork, corn on the cob, milk, tea, fruit and vegetables. Admission was free as long as you filled out a registration form and a variety of non-organic entrepreneurs clearly saw this as an opportunity. Three different men offered me fake Rolexes inside the exhibition! I kept expecting to see knockoff “Organic” brand vegetables for sale. I also met people from as far away as Fiji, Trinidad and Ghana--all of them from government import inspection agencies.

The vast majority of products being exhibited were Chinese-grown and intended for export, but speakers at a workshop being held concurrently with the exhibition pointed out that this is a less and less promising area. No one talked explicitly about the food safety scandals of the past year, but Mr. Chuk Ng of Naturz Organics pointed out that more and more products are being turned back by customs agents in Europe. Mr. Li Xianjun of the China Organic Food Certification Center (COFCC) noted that organics are a shrinking percentage of China’s agriculture exports. Ong Kung Wai, representing IFOAM (International Federation of Organic Movements), said that only 3 percent of all global organic sales are currently outside of Europe and North America (and most of that is probably in Japan). He urged producers in China to focus on “growing” the domestic organic market.

We at IATP also see the potential for organic agriculture in China to help feed their domestic market. Government support for both organic food and food safety are currently almost entirely focused on exports, leaving 1.4 billion Chinese consumers with a deeply compromised and unsustainable food supply. Surveys have consistently shown that China’s urban middle class is concerned about the safety and quality of their food supply and willing to pay more for food they can trust. But an exhibitor, Thomas Lin from Garden Citi Inc, explained to me that the term “organic” is unfamiliar in China, and there is rampant counterfeiting of “green foods.” One of the speakers in the workshop said that there is also a much larger price premium for organics in China than in the West. Here organics are generally three times as expensive as equivalent conventionally-grown products. In the U.S., the difference is closer to 25 percent.

Why is there such a great difference in price? Are there obstacles for organic agriculture in China? Or subsidies supporting conventional agriculture that make it so much cheaper? Tune in again…

—Jim Harkness

May 28, 2008

The Mandate of Heaven

IATP President Jim Harkness is blogging from China through June 14.

I was welcomed back to Beijing yesterday by an official “severe air pollution” warning from the city government. Skies have been a sickening yellowish gray, as dust from a sand storm mixes with the city’s smog before covering every surface indoor and out with a thin film of grime. Such storms are common in Beijing in March, but this one is unusually late. On my last trip to China, in April, I got stuck in a typhoon in Hong Kong and was told that they aren’t supposed to hit until July. And January saw the biggest blizzard disaster in decades strand tens of millions of people trying to make their way home for the Chinese New Year.

Of course, these are minor breaches of the natural order compared to the Sichuan earthquake, but all manner of disruptions (including the violence in Tibet and this spring’s stockmarket crash in Shanghai) are assessed here for their cosmic significance. The unanimous judgment of fortune tellers and text-messagers in China is that 2008 is shaping up as the most “inauspicious” year in memory.

I will be blogging from China from now until June 14. On this trip I am lecturing at the Central Party School of the Chinese Communist Party, attending a major organic convention in Shanghai, meeting with rural development experts in Yunnan Province and co-hosting a workshop on U.S. and Chinese agriculture issues with economist Daryll Ray. So stay tuned.

What could possibly go wrong?

—Jim Harkness

January 16, 2008

Local Company Makes Good, But How About Local Farmers?

The Financial Times today published a profile of Chinese dairy giant Yili. While it might be unfair to describe the piece as “fawning,” let’s just say it’s surprising that such a long story cites only one source aside from the company itself, and quotes no one other than the company’s CEO, Mr. Pan Gang. The reader gets a touching tale of how a collective dairy factory in Inner Mongolia worked its way to national prominence despite the tremendous challenge of having to deal with huge numbers of small, backward farmers. We hear how fiercely competitive the dairy market is, with Yili the only “purely” Chinese firm vying for market share with a host of foreign and joint venture rivals. And we feel Mr. Pan’s anger about tax breaks the Chinese government gives to foreign dairy firms, who turn around and use that advantage to undersell local companies. 

The real picture is a bit less heroic and more complex. Despite its complaints about the unfair advantages of its international competitors, Yili has always had lots of government support. Its expansion to now buying milk from a million farmers (!!!) has depended on those top-down sweetheart deals with local officials that the farmers in Yunnan were complaining about last week. (I was expecting a more critical take on this from an article titled “Chinese Dairies Milk The Local Advantages.”) And even if they weren’t being rounded up for Yili by local government, farmers would have few alternatives for their milk. Yili and Mengniu, another Inner Mongolia-based giant, have over 55% of the Chinese market, and probably a much higher percentage in the Northeast. Economists tell us that the definition of “oligopoly” is when the top four firms in any industry control over 40% of the market. Recent food safety scandals are speeding up the process, Pan says, since nervous consumers are sticking with big brands and this is driving out smaller players.

Yili’s earning for the first three quarters of 2007 reached 14.8 billion RMB. (about $2 billion) A Reuters story tells us that as of the end of the Third Quarter, 40% of China’s dairy farmers were losing money and some were having to kill their cows. Welcome to Modern Farming!

—Jim Harkness

January 10, 2008

The Monkey's Paw

Last night I had dinner at the Irish Embassy in Beijing. The occasion was the departure of Joseph Kahn, the New York Times bureau chief (and Irish citizen), who is moving to New York to work as Deputy Foreign Editor for the paper. I have known Joe since the early 1990s, and China’s loss is my gain, since his couch will now be added to my list of free places to stay in Manhattan.

Joe won a Pulitzer Prize for his reporting on the growing gap between rich and poor in China, but I think some of his best work was a recent series of reports on the environmental cost of China’s Rise.

A longer piece on the same topic by Jacques Leslie (which quotes yours truly) is the cover story in the current edition of Mother Jones.

For China, the neoliberal growth model adopted over the past quarter-century has been like the Monkey’s Paw in W.W. Jacobs’ classic, spooky short story of the same name. The story tells of a poor but happy family that comes into possession of a magical charm, the monkey’s paw, which will grant them three wishes. The father wishes for 200 dollars and his wish is granted, but not in the way he expected. The next day, a man from the factory where their only son works comes to the door and informs them that their son has been caught in machinery and killed. He gives them 200 dollars as compensation for the death.

China’s “reform and opening” (their shorthand for the market reforms instituted since the early 1980s) has likewise been a mixed experience when viewed in any but the narrowest economic terms. Overall growth has been spectacular, and contrary to the charges of many external critics, the Chinese people have also gained much greater freedom than they ever had before in a variety of areas: employment, residence, privacy, even basic things like movement and marriage which had been heavily controlled under Mao. But the economic benefits have been distributed very unequally---the gap grows wider day by day---and the new freedoms have limited meaning for the country’s poor. Material gains are also mitigated by corruption, crime, resurgent prostitution and drug use, and widely felt social anomie and insecurity. The terrible environmental cost of China’s growth is certainly the most jarring example of a seeming social advance turning into a nightmare.

Recent pronouncements by the Chinese leadership about focusing on the quality rather than just the quantity of growth are encouraging. The State Environmental Protection Administration has been given new powers, and friends tell me that it will be upgraded to ministry status in the next few years. The old rhetoric about “letting some get rich first” has been replaced by a new concern for the disadvantaged. Elimination of the agricultural tax and more funding for schools and health care in rural areas are certainly steps in the right direction.

But none of this addresses the basic problem of a system that pushes growth without limits and makes society and nature bear the cost, while allowing the benefits to flow to the wealthiest. And that’s where the analogy with the Monkey’s Paw breaks down. The evil charm’s spell brought both fortune and sorrow to the same family, but neoliberal economics distributes profits and pain very unevenly. But the good news is China doesn’t have to choose between impoverished Maoist isolation and a toxic world that looks like the set of Blade Runner. The challenge for IATP and for the world is: What can we do to help them make a better choice?

—Jim Harkness

January 07, 2008

What the Farmers Said....

(Below is the second in a series written from China by IATP President Jim Harkness. ed note)

As promised, today I report back on what local farmers said when we talked to them after our visit to Chennong Agriculture Company HQ in Yunnan Province. (To be on the safe side, even though I'm sure it wouldn't be an issue, I have omitted farmers' names.)

The area around Kunming, including Chenggong, has a lot of intensive vegetable cultivation. This probably both contributed to and was then bolstered further by the growth of Chennong Company, and the company is now a leading source of seedlings for local farmers whether they sell the produce to the company or not. This area has a mild winter, but temperatures do dip below freezing at night, and winter is also fairly dry. Hoop houses---simple, temporary greenhouses made by stretching clear plastic sheeting over a bamboo frame---permit cultivation year round, with up to six harvests over 12 months.

After our visit to the Chennong facilities was complete (and we had sampled the local cuisine) we decided to stick around and talk to some farmers. A young day laborer volunteered to be our guide. She was not from the area, but had lived there for some time doing construction, and had gotten to know many local farmers.

She was a good example of the mixed blessings of development in China. I noticed she had a shiny new mobile phone, which she modestly said had only cost a few hundred RMB. She bought it when she and her husband were getting regular work at a good rate, up to 20 RMB a day. But his foot was run over by a truck on the work site and the small cash payment the boss gave them couldn’t cover his hospital bill, which was over 10,000 RMB. So he took their baby and went back to their hometown in the poor, northeast corner of the province, to recuperate at his parents’ home. Shortly after he left, work at the site was suspended, so she was left with no income and nothing to do, and therefore happy to show us around. (We insisted on paying her for her trouble when we left, but she put up a big fight, saying we were friends and she didn’t want us to think she was doing it to get paid.)

We first met these men preparing to load a big basketload of spinach onto a tractor to take to market. They told us they grow a dozen or more varieties of vegetables for sale in local markets. They’re hoping to get 1 RMB per kilo for this spinach.

Inside their hoop house, the women of the family picked spinach and carried it out to the road on their backs in wicker baskets.

They buy their seedlings from Chennong, and speak highly of the 100 percent survival rates and high productivity. When they grew their vegetables from seeds, farmers could never have harvested five or six crops a year as they can with Chennong’s seedlings. They sometimes sell to the company as well, but they aren’t enthusiastic about agribusiness. They-----in fact all the farmers we spoke to----laughed at the idea of a floor price or a contract. “Even if you have a contract that specifies a price, it doesn’t say how much they have to buy, or that they have to buy anything at all.” When prices are low, Chennong’s buyers pick only the very highest quality produce---often a tiny proportion of the crop. So even if they offer a floor price for what they buy, the farmers are still stuck with the bulk of their crop.

There were other complaints. Chennong, they told us, uses its influence with local government to get preferential access to valuable land. (As another farmer put it, “They see a piece of land they like, and then they go and find the officials, who get it for them.”) And their processing facilities have polluted local waterways. “We used to be able to catch shrimp and fish in the ditches, but there’s nothing left alive now.”

Down another row of hoop houses a husband-wife team, friends of our guide, were picking a different green vegetable (I think it’s sometimes called Shanghai bok choy in English). They said prices vary tremendously during the year, from as low as 5 fen (100 fen = 1 RMB) to as high as one RMB per kg. They raised six hoop houses worth of vegetables in 2007 that they didn’t even bother to pick because the price was so low.

Like so many farmers the world over, their biggest problem is low prices combined with growing costs. In a good year, they can sell 10,000 RMB worth of veggies, but inputs such as fertilizer, pesticides and plastic sheeting for their hoop houses add up to 6-7000 RMB. The farmers complained that inputs now cost ten times what they did 20 years ago, a rise not matched by increases in food prices. They also have to pay a variety of taxes and fees. The national Agricultural Tax was officially scrapped with great fanfare several years ago in order to help reduce the economic burden of farmers, but a variety of fees are either still being levied or have been added at the local level.

An added concern in Chenggong is organized crime. Local gangsters started charging the truck drivers who delivered vegetables from field to market 50 to 100 RMB per load, so most have stopped coming. When farmers load up their little tractors and take their own produce to market, they are often waylaid on the way and forced to sell their load to gangsters at below the market price.

—Jim Harkness

January 06, 2008

Chinese agribusiness: a visit to Chennong Corporation

One of the big dilemmas of Chinese agriculture is the issue of scale. Traditional farming was mostly carried out by individual households on very small plots of land. After the Communists took power in 1949, there was land reform and a popular mutual aid and cooperative movement, but the Mao gradually moved rural China toward a system that organized all agricultural production into large communes and state farms. Politically, communes were a radically egalitarian form of social organization, but they also followed a logic of economies of scale, permitting more mechanization, larger-scale irrigation, etc.
Following Mao's death in 1976, Deng Xiaoping dismantled the collective system and returned to household farming. By allowing farmers to market an increasing share of their harvest and keep the profits instead of handing it all over to the state, the new system spurred a rapid growth in productivity and rural incomes. Over time, however, farm profits have dwindled, and now China's 700 million farmers have more and more in common with their great-grandparents: they are economically weak, disorganized, lack technical support, have little access to credit, and don't even own the land they farm. (The state is now their landlord.) The issue of scale is once again a concern, but China's particular combination of authoritarian and neo-liberal ideology preclude either bottom-up or top-down collectivization. Instead, the government has promoted the "Company Plus Household" model of contract farming.
I had a chance this week to learn firsthand about the new role of private agribusiness firms in rural China when I was invited to visit Chennong, one of the biggest growers and exporters of vegetables in Southwestern Yunnan Province. (I own a small apartment in Kunming, the provincial capital, and came to town partly for work and partly to visit friends and take a break from a climate-change-defying Minnesota winter.)
Chennong's headquarters is located outside of Chenggong, a town about 25 kilometers south of Kunming. I went with a friend, Ms. Wu Yusong, who runs the World Wildlife Fund Yunnan program. We were greeted by a Ms. Liu, who showed us around the company's facilities and gave us some pamphlets describing the company's history and operations. The pamphlets had nice pictures, but no financial information, so I was left trying to piece things together by triangulating their info and what Ms. Liu told us with what I could find on the web, with somewhat confusing results. According to their own materials, Chennong now produces over 100,000 tons of vegetables a year, and according to a quote of the founder, Mr. Li Yunsuo, that I found on the web they export over 40% of their production. But the Chinese-language Business Yellow Pages says they only do USD4-7 million a year in export business, which would make them very cheap veggies! (it also lists McDonalds and KFC among their custonmers)
Let's just say that within Yunnan, Chennong is considered a well-known medium to large agribusiness. Li Yunsuo, a local agricultural technician, started the company in 1992,with a 5000 RMB loan from the local bank, and they now employ over 1,200 staff and grow crops on over 60,000 mu (about 10,000 acres) of land.

I asked Ms. Liu about the whole Company Plus Household system, and whether this is how Chennong gets its vegetables. She explained that they don’t have their own farms, nor for the most part do they contract with individual farmers. Their original approach was to work with farmers directly. The company provided free seeds and inputs for the first crop, to guarantee a profit for the farmers and overcome any doubts they might have about converting from grain or tobacco to vegetable farming. In return, the farmers signed contracts committing them to sell their crops to Chennong. The contract sets a floor price: if the market price at harvest time is higher then the company pays 80 percent of the higher price, and if the market price is lower then the company still pays the agreed-upon floor price. Ms. Liu explained that whereas the government used to promote this type of “company plus rural household” contract farming, Chennong found that farmers would often break their contract with the company when the market price of their crops rose above the guaranteed price. They also found that it was hard to guarantee supply and quality, especially for meeting the demands of export markets.
To deal with these problems, they have established “bases” around the province where they grow vegetables on large, contiguous areas covering the fields of many farmers under a single contract signed with the local government. “Large” is of course a relative term. Ms. Liu told us that a base must cover at least 100 mu, (1 acre = 6 mu) but most are much larger, a thousand mu or more. In a country where the average farm is only a half an acre in size, this counts as large. And keep in mind, too, that this is highly intensive horticulture, producing four or five crops per year on a given piece of land. Because the base is a single area instead of a large number of scattered holdings, it is easier to provide technical support and supervision. And because the local government is the contractee, it takes responsibility for making sure the farmers do what they’re supposed to. The production base system reduces the company’s risk and increases its control to such a degree that Chennong has fewer and fewer contracts with individual farmers outside of this system.

Because land costs are high in the areas around Kunming, Chennong's bases are farther afield, and we weren't able to visit any of them, but our host took us to see they company's processing facility and nursery.

The processing facility includes cooling, quick-freezing, clean, sorting and packaging. Workers earn anything from a few hundred up to a thousand RMB per month, not a great wage by urban standards but far more than most farmers. They live in a shiny new dormitory which we also saw (from the outside).

We also visited the food safety lab. The lab is staffed by three people; two are university graduates and the third has a master’s degree in food science. They focus on testing for biological contaminants, since the government’s export product inspection station will test for pesticide residues. They showed us their equipment, which to a layperson’s eyes looked very impressive and included an Agilent gas chromatography machine. Outside the lab a sign proclaimed that the company had successfully been granted ISO9000 and HACCP food safety certification.

I couldn't help but wonder, though, if these three people could do all the necessary testing for a company producing 100,000 tons of vegetables a year!

Chennong produces all of its own seedlings, selling many to local farmers in Chenggong and shipping the rest to its bases around the province.

The company got Green Food certification for some if its products, but found it too expensive (about 12,000 RMB to get certified) to be cost effective. This greenhouse worker was ladling chemical fertilizers into the floating beds in which they grow their seedlings.

After our tour was finished, we took Ms. Liu to lunch, which was excellent. She confessed that although she likes their products, she doesn’t eat them: too expensive. And she said that even though their bases are far away, many local farmers buy their seeds or sell their vegetables to Chennong.

Tomorrow: What did the farmers have to say?

—Jim Harkness

October 02, 2007

China and Africa

I head home today, after a productive trip. I spent the past couple of days at a conference on China's relationship with Africa. Some interesting related papers can be found at the web site of the Center for Chinese Studies of Stellenbosch University, South Africa. There was a fascinating lineup of participants: current and former ambassadors from China to African countries and vice versa, social scientists, businesspeople, China Exim bank officials, Foreign Ministry types and reps from African (but not Chinese for some reason) NGOs. The guiding assumption of the conference seemed to be that increasing Chinese trade and investment in Africa would be a good thing, and I took pains to remind participants that this is not at all a given. Most of the attention and concern about China in Africa has focused on minerals (including petroleum) and big dams, and though this meeting was much richer and more nuanced (with a lot of interesting discussion of the role of very small Chinese entrepreneurs and firms acting completely under the radar of official Chinese presence), I was still surprised at the lack of attention to agriculture. Clearly there's work to be done on this issue, especially as the "biofuels boom" hits Africa, and the threat of agricultural land (and precious water resources) being swallowed up by fuel crops for export. China has wisely restricted use of food-producing land for biofuels production. I wonder if they might consider applying this same wise policy in Africa?

Sam Fromartz wrote and asked what I have been eating, so let me end this China Trip blog with a few food pictures!

These are from a bustling Shanxi restaurant, representing one of the regional cuisines that you don't see much abroad. People in Shanxi love dark, thick vinegar, mutton, and noodles in all shapes and sizes. The tube-shaped noodles the woman is making will be steamed, then diners dip them into a vinegary sauce before eating. The big pancakes are eaten plan as the bread course at the end of the meal.

—Jim Harkness

September 27, 2007

Start-up challenges of a Chinese food co-op

(Ed. note: IATP's President, Jim Harkness, is blogging from China as he meets with experts on China's food and farm system)

The meeting I blogged about on Saturday on the Guoren food co-op had left me pretty confused, so I was glad when professor He invited me to visit their store and give some feedback. Why had they chosen to link consumer and producer co-ops? How could they function as a delivery service and have two stores with 79 members spread all over Beijing - an enormous city of 18 million?

It took over an hour by cab to get from my friend Elizabeth’s apartment in the center of town up to Tiantong Yuan, a massive residential district in the far north. Traffic in Beijing somehow manages to get worse despite already being almost at a standstill during rush hour. Soon the cars will travel only in reverse…

Tiantong Yuan consists of over 100 30-story apartment blocks, packed into a few square kilometers of northern Beijing. Over 300,000 people live there, a population of about the size of St. Paul, MN. (OK, some of us think of that as a major city!)

As you can see from the picture, all that was planned and built were apartment blocks, with some small open spaces in between. There is no commercial area. As a result, entrepreneurial residents have turned first-floor apartments into little bodegas to provide for basic needs. This is a huge, middle class “food desert” due to bad urban planning, rather than long-term urban decay.

The address of the co-op store was one of those first floor apartments. Professor He was held up in traffic, so Zhang Chao, the marketing manager of the co-op, showed us around. He explained that the co-op does want to build a base in a specific community, instead of having its members spread all over the city. The immediate neighborhood has over 60,000 residents, all of whom face the same lack of access to fresh food. So the strategy started to make more sense to me, until I saw the actual items for sale. The co-op has its own little bodega, with liquor and toilet paper and instant noodles. And then they have their co-op members’ store, a single room with shelves of dry goods on two walls. But there’s no fresh food! The store sells dry noodles and various organic grains (millet, rice, wheat flour), but most products are higher-priced cooking ingredients or medicinal products.

This is where the problem of the producer/consumer link comes in. Guoren needs to sell what its producer members grow, and what wasn’t clear in Saturday's meeting was that none of the producers are near Beijing. They are all farming co-ops around China that have been set up in recent years as part of an effort to revive co-operative farming on a non-coerced basis. So the basic idea of setting up a co-op to meet the food needs of a community has gotten lost in the mix, and instead of cabbage and carrots they’re selling dried fungus and diced deer penis.

The good news is that they were aware of this problem, in part because of the meeting last Saturday. Professor He arrived and explained that they now plan to separate the functions of the co-op. So Zhang Chao will run a domestic fair trade company to market goods from the co-ops in Beijing, and separately the consumers’ co-op will build a membership based on selling food that its members want to buy. The idea behind the fair trade company is interesting. There is so little trust of the different labeling systems for healthy or organic food in China that professor He thinks it may be possible to build a different type of brand around farming co-ops. She wants consumers to think of food that comes from co-ops as trustworthy, fair and healthy. In this way, the dozens of new co-ops will have a market advantage, and through the fair trade company it will be possible to guarantee and gradually raise environmental standards on the farms.

It’s important to note that for now, these organic food co-ops are as small and tangential in relation to mainstream organic in China as organic agriculture in the U.S. was in relation to conventional agriculture 10 years ago. A staggering 8.6 million hectares of land is under organic cultivation in China (as opposed to 2.2 million in the US), and although much is consumed domestically, a large proportion also goes to foreign markets. There are serious doubts about the quality and safety of the food being exported under the organic label because of the weakness of the certification system here. Produce is almost entirely bound for nearby markets in Japan and Korea, but more durable commodity crops such as soy go to the U.S. (You’ve probably had some if you’ve bought Silk, a popular brand of soy milk.)

The people and places I’m visiting on this trip are important because they represent the beginning of a domestic backlash against industrial export agriculture in China. I think we need to do all we can to help them, for our sake as well as theirs.

—Jim Harkness

September 26, 2007

Food is Good for Everyone

(Ed. note: IATP's President, Jim Harkness, is blogging from China as he meets with experts on China's food and farm system)

On the way to the DeRunWu Organic and Natural farm near Beijing, we stopped to make a few deliveries to nearby customers. The northern suburbs of Beijing, dusty villages and cornfields less than a decade ago, are quickly being covered by sprawling, gated residential compounds. Initially built to re-create the American suburban experience for expat families, these pricey developments are increasingly occupied by China’s own growing middle and upper classes. These people are Ji’s market (the owner of DeRunWu), but they’re also the biggest threat to his business. Suburban sprawl is driving up land rents so quickly that it has become his biggest expense, and Ji’s having trouble finding farmland near enough to the city for easy next-day delivery. He pointed out large plots of fallow farmland that have been bought by speculators and left idle as they wait for the price to rise. As we wandered the well-groomed but sterile streets of the Yosemite Villas looking for the right address, we pondered the ironies of “green consumption.”

Just before we reached the farm, we passed a row of very productive-looking gardens. “This is where farmers grow the food that they eat. They use some chemical fertilizers, but no pesticides: they only use those on the crops they sell.”

Then it was on to the farm, which consists of a row of five greenhouses and the strips of ground between them. The greenhouses were built with financial support from the local government, which gave farmers free building materials, seedlings and fertilizer as part of a plan to develop the area as a strawberry production zone for the city of Beijing. But as the laws of supply and demand would have it, the price of strawberries crashed when the whole district began growing them, and many farmers turned to other crops or simply abandoned the greenhouses. Mr. Ji has a long-term lease on his farm from the local town government, and hired local farmers and an agronomy technician to work for him.

In the winter, the metal frame will be covered with plastic sheets, and during the coldest months, straw mats as well. Aside from a few vegetables like tomatoes and eggplants, they can grow produce right through the winter at this latitude.

Instead of chemical fertilizers, the farm uses sheep dung and worm waste. (A sack of 50 kg of worm poop, costs 400 Chinese yuan per ton.) They also take spoiled or worm-eaten vegetables and make a sort of liquid goop that is spread on the fields.

Mr. Ji gets advice from agronomy professors at Beijing Agricultural University and is also constantly experimenting. On our way to the farm, he spoke animatedly on his cell phone about the new type of sawdust they are spreading on the soil this year, and how it holds in moisture and promotes a healthy community of worms and microorganisms.

There were lots of white and yellow butterflies on the farm, as well as this fat toad, which Ji pointed out as a sign of ecological health.

Mr. Ji has his own ideas about controlling pests: he doesn’t. Non-chemical treatments that other organic farmers use, such as chilli peppers, are not allowed on his farm. And his workers aren’t even allowed to kill bugs with their hands! He calls this radically non-interventionist form of farming “ecological organic,” to distinguish it from plain old organic.

As a result, the crops I saw looked pretty scraggly. It was also Monday, so crops had just been picked clean for delivery, and that probably explained the lack of yummy fresh, photogenic vegetables.

Ji did find me a juicy, meaty tomato, which I had already eaten half of before I thought to document it!

Ji has installed a solar shower for the locals who work the farm. Perhaps because the crops had just been picked that morning, the workers weren’t around when we visited. Ji said they take a long lunch back in their village nearby. Labor costs are another major expense for the farm, but there are plenty of willing workers. What with the small sizes of their fields, North China’s arid climate and the disastrous schemes of local government, villagers are happy to become salaried employees like in the collective era and let DeRunWu take on the risks.

After our farm visit, Ji picked up his wife and they gave me a lift back into town. They were going to see “The Future of Food,” a documentary about industrial agriculture that we showed at IATP last fall! The library at the Sino-Japanese Environmental Training Center had just ordered a copy, and a dozen or so people were gathering to watch it together.

Just before I hopped out, I asked what subject Ji had gotten his PhD in. “Nano-Materials,” he answered. To which his wife added, “for guided missiles. He made weapons.” We were all silent for a moment and then Ji said, “Arms are only beneficial to some people, but food is good for everyone.”

—Jim Harkness

September 25, 2007

An organic food store in China

(Ed. note: IATP's President, Jim Harkness, is blogging from China as he meets with experts on China's food and farm system)

Monday, Sept 24

Today I visited the operations of DeRunWu Organic and Natural. I got their phone number from a friend, a restauranteur who has purchased their salad greens for over a year. When I got through to the owner, a Mr. Ji, he said he’d be happy to show me the farm but suggested we meet at their store, which is easier to find, and go from there. The store is on a dusty road in the patchwork of urban sprawl and cornfields on the way to Beijing International Airport.

Arriving early, I had a chance to chat with the young store clerk before Ji showed up. Only on the job a month or so, he is already a touchingly earnest convert to organic food. I ask how he likes working for an organic business and he said, “It’s wonderful!” And then, with a dramatic gesture sweeping his hand across his face, “They’ve torn away the masks!” When I looked puzzled, he explained that most people hide their problems, cover up bad news or talk behind other peoples’ backs. “Here if something’s wrong we have to acknowledge it and deal with it.” I asked what this has to do with organic farming, and it was his turn to look puzzled. “For the supermarket, they use pesticides on the vegetables and wrap them up and add chemicals to make the tomatoes redder. Organic food is natural, pure, honest. Some of our vegetables don’t look as shiny or fat as those in a supermarket, and some have even been chewed on by bugs, but I feel like if bugs want to eat them then that must mean they’re safe and delicious!”

I was still basking in the sunshine of the clerk’s organic moral universe when Mr. Ji and his wife arrived and he told me how he got into this business. Mr. Ji belongs to the Back to the Land school of organic farming: “I was a PhD student at Beijing Aviation University, and I belonged to a student group called Read and Till----you know, like farming and studying? We did some investigations about pesticides in food and found that there basically wasn’t any food that didn’t have some chemicals in it. So one of our teachers arranged for some people from his home village to set aside some land to grow vegetables just for us, and we agreed to buy as much as they could grow.”

Ji’s job was to manage communications with the farmers, arrange deliveries, etc. In 2002 and 2003 the students bought fresh vegetables grown without the use of pesticides or chemical fertilizers. The next year, Ji and some friends decided to start an organic farming business marketed to non-students, but after a year they had lost money and his friends quit. By this time, 2005, Ji had a PhD and a post-doc at Beijing University (the equivalent of China’s Harvard) but he was hooked on farming. He had already given away all his books and had nothing left of his academic profession but his framed diploma.

So Ji quit school altogether and he and his wife set up DeRunWu Organic and Natural, which is just finishing its second year in operation. They rented farmland near Beijing and hired locals to work for them. DeRunWu is mostly a home delivery business. Two times a week, they deliver 8-lb cloth sacks filled with “whatever’s fresh and ready” from their farm for a fixed price of about $11. (In fact, there are lots of exceptions to the “fresh and ready” rule, and Ji and his wife keep records of the preferences of different customers: no eggplant, no tomatoes, love arugula, etc.)

They also have a small store. Transport costs are a major expense and Ji hoped that having a store would persuade more customers to come to him. For the most part, this hasn’t happened despite discounts for vegetables bought in the store. “To my customers, money is no object, and they’d rather stay at home.” Those who do shop at the store can buy other organic and health foods there as well, and the profits from these products help keep the business afloat despite Ji’s determination to keep prices for the farm produce low and sell by the pound rather than charging more for high-value items like fresh basil.

Must sleep now. I’ll write about the farm visit tomorrow.

—Jim Harkness

Challenges of a farmer-consumer co-op in China

(Ed. note. IATP's President, Jim Harkness, is blogging from China as he meets with experts on China's food and farm system)

Saturday Sept. 22

Today I went to a half-day meeting to discuss the Guoren Rural-Urban Mutual Aid Co-operative. Professor He Huili of China Agricultural University organized the meeting to review the rocky first three months of the co-op, and get ideas for how it might become more viable.

Guoren is a sort of a hybrid, intended to provide a market and a fair price for various organic farms and farmer-owned rural enterprises, and also to guarantee safe and healthy food for its urban members. Farmers join by committing a certain amount of their produce, urban members (there are currently 79) pay 100 Chinese yuan for a share in the co-op. Guoren's problem has been lack of activity: the members just aren't buying. Meanwhile, one of the co-op's rural organizers described ambitious plans for processing, handicrafts, countryside day tours, etc. as the next phase of development.

It was a rather contentious discussion. An academic expert said that Guoren was trying to do too much. A shareholder said that maybe instead of talking to experts, the co-op should have a full meeting of its members to discuss what to do. Someone questioned the workability of a single co-op with producer and consumer members. There was disagreement about whether Guoren should be a charity or a business. A successful commercial market garden businessman offered to take over running the whole operation. Etc, etc.

After half a day, I was exhausted and a bit frustrated, but to Professor he's credit, she took it all in very patiently. When I made my exit after lunch, she was re-convening the group to go over the co-op business plan. On Tuesday, we're meeting at the store to talk some more.

—Jim Harkness

September 21, 2007

Meeting China’s Man of the Year

(Ed. note. IATP's President, Jim Harkness, is blogging from China for the next two weeks as he meets with experts on China's food and farm system)

Despite all the concerns about air pollution affecting athletes at next year’s Olympics, Beijing’s skies are brilliant blue this week. Friends tell me I was fortunate to miss a nasty spell of smog that ended the day before I arrived.

This afternoon I met with Mr. Li Changping. Li became a hero to China’s farmers in 2000 when he wrote a letter to then-Premier Zhu Rongji exposing the bitter hardships facing the rural Chinese. A Communist Party member who had worked for 17 years in rural townships in Central China, Li detailed the desperation of farmers in his township, 80 percent of whom were losing money and 85 percent of whom were in debt, and railed against corrupt local officials. Amazingly, his letter actually reached the Premier, who demanded that the provincial government carry out an investigation. But in a sign of the limited reach of the central government in contemporary China, nothing came of the probe and once it was over, Li himself was “investigated” by the local government and fired. (He now works as a rural development consultant.) Nevertheless, the affair brought to light the severity of the economic and social crisis in rural China, and Li was named “Man of the Year” by one of China’s leading newspapers.

I wanted Li’s perspective on rural co-operatives as a means for farmers to reduce risk and get a better deal in the market. Last week I visited farms in southwestern Wisconsin that are members of America’s largest organic dairy co-operative with Professor Zhou Li, a Chinese researcher who’s currently in residence at IATP. Afterwards, Zhou said that co-ops based solely on production and marketing have been tried in recent years in China, but almost all collapsed as soon as there was a downturn in the price of their products. But was this because of some objective condition in China, some legal or economic obstacle to this form of organization, or because of the way the co-ops were organized or managed? It wasn’t clear from my discussion with Zhou. Li Changping is developing a credit cooperative and thinks this is a more viable approach to helping Chinese farmers, whose size and lack of collateral for loans (since they don’t own their land) effectively shuts them out of the official banking system.

We also discussed lots of other things: political and economic theory in contemporary China, cooperatives vs collective agriculture, the problems of the government-supported corporate agriculture model (“Company Plus Farmer’), and the different approaches to rural cooperation pursued in Taiwan and Japan. I’m still not clear on what the key obstacles are here and now, but it was a great start!

—Jim Harkness