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Foreign investors eye Chinese farming
(Wednesday, Oct. 1, 2003 -- CropChoice news) -- Richard McGregor, Financial Times, 09/30/03:
The highway out of Taiyuan, capital of landlockedShanxi province, winds
through miles of rough, denuded hills, a man-made moonscape stripped bare by
loggers and then washed clear of fertile topsoil by erosion.
It is the kind of scene that alarms leaders such as Wen Jiabao, China's
premier, who recently called for the "strictest measures" to prevent the
further loss of valuable farming land to factories and logging.
But as you swing down into the alluvial plains, a different landscape
emerges, of fields thick with corn and ripe - in the eyes of a growing band
of foreign investors - for a host of new cash crops.
"China can be Asia's farm and kitchen," says Ian Neeland, an Australian
agronomist based in China who has just launched a project in Xinzhou county,
near Taiyuan.
For many countries already rattled by China's emergence as the manufacturing
"workshop of the world", the prospect that it could also become a
significant farm exporter will be unwelcome news.
But it is a vision shared by a growing band of investors who believe China's
cheap labour, good available soils and proximity to valuable markets make
for a good business.
"Countries like Japan and South Korea can no longer afford produce
air-freighted from the US and Australia, or from their own farmers," says Mr
Neeland, head of Greenfields, a regional investment group in China.
Foreign investment in Chinese agriculture is tiny compared with
manufacturing each year, but is welcomed by a central government perennially
struggling to quell rural unrest and boost falling farm incomes.
But modernisation of the agricultural sector, which employs about two-thirds
of China's 1.2bn population, is a double-edged sword for the government.
While the introduction of modern farming methods and technology has the
potential to lift some salaries and increase crop yields, it may force the
consolidation of small farms and push millions of families into ill-prepared
cities.
China is particularly vulnerable to competition in cereal and staple crops
such as rice, wheat and oilseeds following its entry into the World Trade
Organisation.
In vegetables, however, such as sweetcorn, peppers, mushrooms and leeks,
Chinese exports to countries such as Japan and South Korea are already large
enough to have prompted a backlash from farmers in those countries.
Local sales are also rising to a growing Chinese middle class market
demanding better quality and safer foods and more convenient forms of
packaging, all skills that can be marketed in China from overseas.
In Shanxi, Mr Neeland has teamed up with Syngenta, the listed Swiss
agribusiness and seeds giant, to grow sweetcorn and, in a separate venture,
iceberg lettuce. Both crops are relatively new to China.
The venture's main customers initially will be KFC, a unit of Yum Brands,
the US fast-food company, which is opening about 100 stores a year in China.
KFC's expanding presence in China, and that of companies such as McDonald's,
another fast-food giant, is already transforming agriculture, sparking new
crops and the standardisation of their harvesting and production.
While big buyers such as KFC provide little profit because of their power to
demand low margins, their large volume purchases can provide businesses such
as Greenfields with important cash-flow.
They also provide a quality benchmark that helps sales overseas, and to
China's own fast-growing supermarket and fresh packaged foods industries.
Japan's sweetcorn market alone is worth $400m (€365m, £255m), according to
Greenfields research.
For companies such as Syngenta, much of their business is akin to adult
education, convincing farmers that their superior seeds and herbicides are
worth the expense over local products, and then making sure they are used in
a way which does not damage the land.
"We have to basically try to invent our business here," says Gérard Renou,
head of Syngenta's vegetable and flowers division. "We have to be closely
involved with all the players making decisions - otherwise you can't commit
yourself in a way that the customer expects."
The starting point is the farmers themselves, who have to be persuaded they
can make more money by growing new crops such as sweetcorn.
A Syngenta survey in 10 provinces found 48 per cent of farmers considered
themselves to be in business, a number the company considered to be
relatively high.
Barely one in 100, however, had structured their farms as companies, and
about 68 per cent of households had to look elsewhere, to labouring jobs in
cities, for example, for more than half their income.
In Xinzhou county, Guo Yushu, a farmer with an annual income of about
Rmb5,000 ($605, €552, £365), admits he struggled to talk the 30 fellow
workers in his village into switching crops to plant sweetcorn.
But it has so far paid off. "We can increase our income," he says. "To be
rich is a good thing in every aspect, for the family and for society as a
whole." | |
