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Agriculture & Farming
Brewer helps plant seeds for success
Last Updated: 2014-07-03 07:18 | China Daily
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A technician inspects a barley field in Yongchang, Gansu province. Many farmers in the province grow barley for Anheu ser-Busch InBev NV under a contract program. [Photo/Xinhua]

Contract farming program leading farmers in Northwest China on path to prosperity

Farmer Wang Xueping's fondest wish is that Gansu, her home province in Northwest China, will get more rain so her farmland will be more productive.

Gansu accounts for less than 2 percent of China's grain output, although it covers 4.6 percent of the country's land area.

Much of the province is high and dry, making it unsuitable for raising grain. But people are trying to use modern planting methods to change the situation.

Last year, Wang, 32, joined a contract barley farming program organized by Anheuser-Busch InBev NV, the world's biggest brewer.

Wang's home is on the loess plateau near the Tengger Desert. Irrigation systems rely on melted snow from the Qilian Mountains.

"My family has been growing barley for years. We earn less than growing wheat. But barley can survive with very little water, which is a safe choice for us," she said.

After joining the program, Wang said output rose by 50 percent last year to 9,000 kilograms per hectare, with the help of experts from AB InBev.

The purchase price set by the company was 2.20 yuan (35 cents) per kg, 10 percent higher than in 2012.

Mas son Zhang, vice-president of procurement at AB InBev for the Asia-Pacific region, said: "We can help growers improve quality and output through this program, as well as enhance soil health and moisture retention. And this program helps reduce risks in the supply chain and the market for the company's operations."

Farmers can use a "smart barley" app to help with their crops. The app uses data compiled by participants in the program in China as well as Russia, Canada and the United States.

"It is the first step in our mission to create a full industry chain in China, and it also shows our unswerving commitment to the China market," Zhang said.

AB InBev started promoting contract farming of barley in China in 2010. It purchased 53,000 metric tons of malt from Gansu, Inner Mongolia autonomous region, Jiangsu province and Xinjiang Uygur autonomous region in 2013, and it plans to buy 10,000 tons more this year. The purchase price is set 0.06 yuan per kg above the market price.

Wan Fushi, a consultant in the grain and oil crops division at the Mini stry of Agriculture, said the program will help farmers learn more about crops and client preferences and better adapt to market demand.

"I hope more companies, especially State-owned ones, will conduct similar programs," Wan said.

One of the program's highlights is that the potential purchaser introduces research institutions to help farmers breed good-quality seeds before choosing farmers to plant the crops.

It creates a win-win situation among farmers, malt factories and the brewer, by sharing interests and risks and adopting advanced technology, Wan said.

"Contract farming" is not a new concept in China. It dates back to the Qing Dynasty (1644-1911), when businessman Hu Xueyan ordered silk from farmers in Zhejiang province through a system of contracts and down payments. Farmers would rear silkworms based on the agree ments.

The Chinese government has been promoting modern contract farming since the early 1990s. The Ministry of Agriculture has issued guidelines to regulate contract signing and urged cooperation between farmers' cooperatives and leading food-processing companies.

Agriculture Minister Han Changfu has said that more than half of China's farming activities should be based on contracts by the end of 2017.

The Ministry of Agriculture, Ministry of Finance and the China Banking Regulatory Commission jointly released guidelines last August to promote the "modernization reform of agriculture", asking local governments to improve contract farming, which can limit price volatility.

Edward Zhu, chief executive officer of Chic Group Global Co Ltd, said that for contract farming to run smoothly, the potential purchaser must be acutely aware of market demand. His company is one of the world's biggest canned fruit suppliers to such big names as Wal-Mart Stores Inc and Coca-Cola Co.

Yet the path of contract farming in China isn't always smooth because of problems on both the farm and purchasing ends, Zhu noted. "Some farmers won't honor their contracts if they can find others who offer higher prices," he said, citing his own experience.

He said the situation will improve with the emergence of large-scale farms. That's what Ma Yuefeng, 30, wants. He gave up a construction materials business to go into farming.

Now he runs a farm covering about 107 hectares. The land was formerly cultivated by 46 households. When local authorities began promoting rural land transfers, Ma and four other individuals set up a farmers' cooperative and won approval to lease the land for 15 years, starting in 2014.

"Land concentration and economies of scale will improve efficiency and returns, and contract farming will be the trend," Ma said. Even water can be more economically used on a large farm, he explained. Large-scale irrigation can save 40 percent of the water that individual households would use.

Almost all of the crops on his land -potatoes, barley, wheat, garlic, asparagus and lettuce -are under contract. His cooperative tries to diversify what it plants to reduce risks.

"I hope we will have more stable orders. For example, if AB InBev will sign a long-term contract with us and guarantee purchase targets and prices, I'd be very willing to join the program," Ma said.

Zhu said: "It's a very bumpy road. China is such a large market, and farmers are used to traditional planting. China should learn from the US and Europe when it comes to agricultural operations.

"Large scales and high technology are important drivers, but it will still take time for China to find its own way."

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