Wulian Apple Grower s Development Assistance Project, Wulian County, Shandong Province, PRC

Transcription

1 Wulian Apple Grower s Development Assistance Project, Wulian County, Shandong Province, PRC Section 5: Monitoring and Evaluation Results and Interpretation Prepared by: Peter Jarvis, Landcare Research NZ Ltd. Client: New Zealand Ministry of Foreign Affairs and Trade. April

2 Contents 1.0 Introduction Year 2000 Data: Average Results Over All Monitored Households Income by source of income Operating expenses by type of expenditure Other expenses by type of expenditure Key household indicators Net profit per adult labour unit and net household surplus per adult equivalent Apple variety and tree crop enterprise budgets ( mean over yielding orchards) Enterprise budgets for orchards at full production (6 years of age or more) Enterprise budgets for mono cropping (2000) Enterprise budgets for inter-cropping (2000) Total income by source of income disaggregated by project activity Summary of key household indicators by project activity (2000 data) Time Series Data (1997 to 2000) Comparison of key household indicators by project activity Nominal (Actual) values for the series: Gross farm income Gross Profit Net Profit Net Farm Surplus Net Household surplus Whole household data converted to real 2000 values Performance of apple varieties 6 year of age and over: comparison across years (1997 to 2000) Nominal values Recommendations for future monitoring systems Reference: Appendices:

3 1.0 Introduction This is the fourth and final economic monitoring report for the project. The results are discussed for the 2000 data set (for all monitor farms aggregated and by project activity); then, the whole household and apple variety budgets are compared over the four-year period (1997 through 2000). No economic data is available for 1996 because the monitoring was not implemented in the first year of the project. There are 60 monitored farms on the project. The number of farms by project activity is shown in table 5.0. Whilst there are 15 non project farmers, who are not targeted as part of the project extension activities, these farmers have, to a greater or lesser extent, adopted orchard improvements of grafting, new planting and improved management. Table 5.0 Distribution of monitoring farmers by project activity Activity Number of farmers Grafters 15 Improved 13 management New Planters 17 Non-project farmers 15 Total 60 Note: New planters include one persimmon grower and one peach grower. Definitions and terms The meanings of the terms used in this report are best described by reference to the budget format used for the aggregation of the whole household data (Table 5.1). Gross farm income is the total gross revenue from all farm enterprises (fruit trees, crops and livestock) as well as any farm related income from non-enterprise activities (such as the sale of forage which is not otherwise allocated in crop income or income from the rental of farm equipment). Gross farm income includes income from cash sales (from quota or sale in the market) as well as non-cash income, which is produce consumed on the farm by the farm household or by livestock. Farm operating expenses include all expenditure items directly related to the running of the farm. These include all enterprises expenses (such as fertilisers, chemicals, packing materials, animal feed, hired labour, and the value of animal manure used on crops) as well as overhead costs not readily allocated to enterprises such as fuel and electricity, rent, and repairs and maintenance. Gross margin (as presented in the enterprise budgets) is gross revenue for the enterprise less the direct operating expenditure for that enterprise (but exclusive of the overhead costs). Other expenses, not specific to the operation of the farm enterprises, are taxation, debt servicing costs (interest and principal), cash family living costs, and capital purchase or development expenditure (which is a capital cost). There may also be income earned off the 2

4 farm and off farm expenditure (such income and costs may be related to running a small business or for off-farm work). Gross profit is calculated after deducting farm operating expenditure but before the costs of interest and taxation. Net profit is the profit after interest and taxation costs. Net farm surplus (or deficit) records the cash and total worth situation for the farm after allowing for family cash living costs and the consumption of farm produce by the farm household, principal repayments on loans, new capital purchases and new development. Net household surplus is calculated after adding off-farm income and deducting off-farm expenses. New borrowing is recorded only after calculating net household surplus but of course adds to the cash surplus available to the farm household. Generally, any negative cash household surplus must be financed by new borrowing or from drawing on savings. Table 5.1: Definition of whole farm budget and key household indicators Cash Non-cash Total Comment worth i ii i + ii Gross Farm Income Volume of enterprise output times price or value Less: Operating Expenses Enterprise expenses (fertiliser, chemicals, animal feed, hired labour, value of animal manure used on crops), fuel/electricity, rent and repairs and maintenance Equals: Gross Profit Less: Interest Interest on loans Tax Equals: Net Profit Less: Family living costs Principal repayments Capital repayments for loans Capital purchases Capital development Equals: Net Farm Surplus Less: Off-farm expenses Plus: Off-farm income Equals: Net Household Surplus 3

5 2.0 Year 2000 Data: Average Results Over All Monitored Households 2.1 Income by source of income Fruit trees contribute the largest component of cash income (35.8%, up from 29.80% last year). 86% of the income from fruit tress is from the sale of apples, 14% from the sale of other fruit tree crops. Fruit trees provide a smaller percentage of total worth (cash and non cash income) (29%, up from 22.3% last year) (Table 5.2, Figure 5.1). This is a change from last year, when food crops comprised the largest proportion of total income; fruit tree income is now the largest component of total income. Income from apples alone is now similar to the total income from food crops (cash and non-cash). Arable crops are the second largest component of total income (24.5%) and 56 % of this income is in the form of consumption on the farm by the household or by livestock; 44% of crop income results from sales in the cash market. Livestock income comprises 17.3% of total worth of income (down from last year) and 13.4% of cash income. 61% of total livestock income is from cash sales and 39% in the form of consumption on the farm or in the form of animal manure used as inputs for cropping enterprises. 20.4% of total cash income is from off-farm sources (Table 5.2). This year there is very little new borrowing (which is now only 0.6% of total cash income, compared to almost 4.9% last year). 4

6 Table 5.2 Income by source of income n = 60 All farmers at all sites Cash Non cash Total Percent of Cash income Income Income Income total income by source Source () () () % % Apples % 30.9% Other fruit % 4.9% Crops % 13.7% Livestock % 13.4% Other farm 1691 n.a % 16.1% Borrowings 67 n.a % 0.6% Off farm 2147 n.a % 20.4% Totals () % 100.0% 2.2 Operating expenses by type of expenditure 42% of gross cash farm income is reinvested in farm expenses of one form or another; 35% in direct operating inputs (Table 5.3). On a total worth basis, 40% of gross farm income (4345 ) is reinvested in direct operating inputs. The total worth of inputs is greatest for livestock; this is because significant amounts of crops grown on the farm are consumed by livestock enterprises. 73% of the value of all livestock inputs is in the form of food crops grown on the farm and only 27% purchased in the cash market (Figure 5.3). Averaged across all monitor farms, 33% of cash operating inputs are for cropping (977 ) and 43% for fruit tree crops (1226, up from 821 last year) (Table 5.3). The noncash worth of inputs into cropping is mainly in the form of animal manure and seed grown on the farm. Other than direct crop and livestock expenses, the most significant item of operating expenditure is for fuel and electricity (167 ); relatively small sums are spent on rent and repairs and maintenance expenditure (Figure 5.2, Table 5.3) although this can vary for individual farmers. 2.3 Other expenses by type of expenditure The largest single item of other expenditure is family living expenses, which have a total worth of 4060 per household or 2554 cash and 1506 non-cash (consumption of produce grown on the farm). Cash family living costs are equivalent to 31% of gross cash farm income (down from 40 % last year). On average, only 79 is spent on loan repayments and no interest is paid; 364 is paid in taxes. 5

7 Table 5.3 Summary of household budget and key household indicators All farmers at all sites Mean income () Income source Cash Non cash Total Apples Other fruit Crops Livestock Other farm 1691 n.a Gross farm income: (a) Less: Operating expenses Apple Other fruit Crops Livestock Fuel/elect. 167 n.a. 167 Rent 10 n.a. 10 R&M 12 n.a. 12 sub total: (b) Gross profit: (c ) = (a - b) Less: Interest 0 n.a 0 Tax 364 n.a 364 sub total: (d) Net profit: (e) = (c - d) Less Living expenses Principal repayments 79 n.a 79 Capital purchases 66 n.a 66 Capital development sub total: ( f ) Net farm surplus: (g) = (e - f) Less: Off farm expenses 634 n.a. 634 (h) Plus: Off farm income 2147 n.a ( i ) Net household surplus: ( j ) = (g - h + i) New borrowing:

8 On average, only 105 is spent on capital purchases and development expenditure (Table 5.3, Figure 5.3). This figure does however vary depending on project activity: Grafters spend on average 91 on capital improvements; improved managers 32 and new planters 262 (Appendix 1); this figure however, is dependent very much on individual farmers within the sample rather than being a consistent figure across farmers. 7

9 2.4 Key household indicators Gross farm income, over all farms monitored, averages per farm. 25% of gross farm income is in the form of non-cash items and 75% in the form of cash sales (Table 5.3). The cash component of total income is up from 70% last year (this is due to higher income from fruit trees). Gross profit is 80% of gross income for the cash component and 20% of gross income for the non-cash component of profit (Figure 5.4). Net profit (after tax and interest) is only a little less than gross profit because tax and interest payments are relatively small items of expenditure (Figure 5.4). A significant proportion of net profit, on a total worth basis, is in a non-cash form (production consumed on the farm by the farm household). Across all farms, the cash component of net farm surplus and net household surplus are positive. Farms generate a cash surplus but off-farm income (net of off-farm expenses) contributes substantially to net household cash surplus. Across all farms, net cash farm surplus is 2378 (up from 432 last year) before allowing for off-farm income and expenditure. Significantly, off-farm income (net of off-farm expenses) is 1513 per household or equivalent to 62% of total cash living expenditure. Off-farm income contributes significantly to a net cash household surplus of 3891 per household (up from 1734 last year), before new borrowing. Because non-cash production is similar to non-cash consumption, the total worth for net farm surplus and net household surplus are about the same as the cash figures (Table 5.3). 8

10 2.5 Net profit per adult labour unit and net household surplus per adult equivalent On average, there were 2.28 adult labour units working on the average farm in 2000 and the farm supported 3.36 adult equivalents. The average Net Profit per adult labour unit was 2831 for the year. Net Household Surplus per adult equivalent supported by the farm was 1106 or 1070 per person. 2.6 Apple variety and tree crop enterprise budgets ( mean over yielding orchards) The price for Fuji apples is significantly higher (1.24 /kg) than most other varieties. By contrast, New Red Star fetched 1.02 per kg, Guoguang 0.50 /kg and John O Gold 0.84 /kg. Fuji is also the highest yielding apple variety. Most farmers grow Fuji; 46 or 77% of monitored farmers grow Fuji whereas only 17 or 28% grow New Red Star, the next most popular variety. Because of the high yield and high price, Fuji also has the highest gross margin. Gross margin for John O Gold apples is a little lower than Fuji (1615 compared to 2013 for Fuji) mainly due to the lower operating expenditure on John O Gold - however, this comparison is between a large number of Fuji growers and a small number of John O Gold growers, who have mature trees (Table 5.4). Based on the available labour requirement data, Fuji is the most profitable apple variety per labour day, followed by John O Gold, and New Red Star. High harvesting labour requirements and a low price make Guoguang the least profitable apple variety per labour day. Of the other tree crops grown on farms, chestnuts appear to be very profitable. Although the income per mu is lower for chestnuts than for the more profitable apple varieties they require less direct crop expenditure and the price per kilogram for chestnuts is five times greater than that for Fuji. Furthermore, the lower labour requirements for chestnuts make them the more profitable tree crop per labour day. However, our sample for chestnut growers is only 4 farmers who had only small areas in chestnuts. 2.7 Enterprise budgets for orchards at full production (6 years of age or more). When analysis is based only on data for orchards 6 years or more of age (mature yielding orchards), Fuji is still the most profitable variety of apple with returns slightly ahead of mature John O Gold. Guoguang is the least profitable with a gross margin per mu about a third of that of Fuji. The yield of Fuji on orchards with trees 6 years of age or more is 25% higher than the yield of Fuji averaged over all orchards regardless of age of trees (3608 kg/mu compared to 2890 kg per mu). On older orchards, John O Gold is almost as profitable per labour day as Fuji (but the number of John O Gold growers is small; only 3 farmers grow John O Gold and have orchards with trees 6 years of age or more so this may be an unreliable comparison). Half the growers of Fuji, in the monitor sample, have trees 6 years of age or older (Table 5.5). 9

11 Table 5.4 Apple variety and tree crop enterprise budgets All trees regardless of age 2000 Apple varieties: Other tree crops: n = New Red John O' ShanZha Per mu Fuji Guoguang Star Gold Chestnut Peach (Hawthorn) Yield kg Price / kg Fertiliser kg Animal manure kg Chemicals Income Cash sales H.Hold consumption Gross income Variable costs Cash items (a) / Non cash items (b) Total worth inputs (a + b) Gross margin per mu Cash margin Total margin (incl. crop worth) Gross margin per labour day Cash margin n.a. n.a. Total margin (incl. crop worth) n.a. n.a. 1 / Mainly animal manure. Excludes family labour Note: The per unit area data (per mu) for Guoguang has been adjusted to equate to 30 trees per mu and the Chestnut data to 25 trees per mu. The raw data overestimated number of trees per mu. 10

12 Table 5.5 Apple variety and tree crop enterprise budgets for trees 6 years or more of age 2000 Apple varieties: Other tree crops: n = New Red John O' ShanZha Per mu Fuji Guoguang Star Gold Chestnut Peach (Hawthorn) Yield kg Price / kg Fertiliser kg Animal manure kg Chemicals Income Cash sales H.Hold consumption Gross income Variable costs Cash items (a) / Non cash items (b) Total worth inputs (a + b) Gross margin per mu Cash margin Total margin (incl. crop worth) Gross margin per labour day Cash margin n.a. n.a. Total margin (incl. crop worth) n.a. n.a. 1 / Mainly animal manure. Excludes family labour 11

13 Although there are 2 monitor farmers with peaches 6 years or more of age, the data suggests that peaches may be more profitable than many of the apple varieties (table 5.5). 2.8 Enterprise budgets for mono cropping (2000) The most commonly grown field crops are wheat, peanuts, maize, sweet potato and soya beans. The most profitable of these crops in 2000 is peanuts (gross margin 475 per mu) followed by soya beans (GM 419 per mu), sweet potato (GM 358 per mu), maize (GM 252 per mu) and wheat (GM 225 per mu) (Table 5.6). On a cash basis, peanuts are the major cash crop grown primarily for sale in the market. The cash gross margin from peanuts is 274 per mu compared to 59 per mu for soya beans and negative cash gross margins for maize, sweet potato and wheat. Maize, soybean, sweet potato and wheat are grown mainly for consumption on the farm by the household or by livestock. Based on the labour data, it would appear that soyabean (returning 28 per labour day) give a better return to labour than other crops (including peanuts). The return per labour day for the less profitable field crops is around 12 per day, which is similar to the daily rural wage rate (Table 5.6). 2.9 Enterprise budgets for inter-cropping (2000) There are three major inter-cropping systems. Sweet potato with soya beans, sweet potato with maize and maize with soya beans. The sweet potato/soya bean and maize/soya bean crops are grown primarily for the cash market (60% of gross income worth is from cash sales) with the sweet potato and maize being the crops sold in the cash market. In contrast, sweet potato/maize is grown mainly for consumption on the farm (particularly by animals) with only about 17% (mainly sweet potato) being sold for cash (Table 5.7). Based on a limited number of growers (only 2 growers of maize/soyabean), the most profitable per mu inter-crop system in 2000 was sweet potato with maize with a gross margin of 365 per mu. Maize/soyabean (Table 5.7) has a gross margin of 178 per mu, and the gross margin for sweet potato with soya beans is 148 per mu. 12

14 Table 5.6 Enterprise budgets for monocropping (Mean results over all sample households) 2000 Maize Peanuts Soya Beans Sweet Potato Wheat Number of farms growing crop Per mu Yield kg Fertiliser kg Animal manure kg Chemicals Income Crop: Cash sales H.Hold consumption By product: Cash sales H.Hold consumption Gross income Variable costs Cash items (a) / Non cash items (b) Total worth in(a + b) Gross margin per mu Cash margin Total margin (incl. crop worth) Gross margin per labour day Cash margin Total margin (incl. crop worth) / Mainly animal manure and own seed. Excludes family labour 13

15 Table 5.7 Enterprise budgets for intercropping (Mean results over sampled households) 2000 Sweet Potato with Soya Bean Maize with soya Bean Sweet potato with maize Number of farms growing crop Per mu Per mu Per mu Maincrop Companion Maincrop Companion Maincrop Companion Yield kg Fertiliser kg Animal manure kg Chemicals Income Maincrop Companion Total Maincrop Companion Total Maincrop Companion Total Cash sales H.Hold consumption BP Cash sales BP Own use Gross income Variable costs Cash items (a) / Non cash items (b) Total worth inpu (a + b) Gross margin per mu Cash margin Total margin (incl. crop worth) Gross margin per labour day Cash margin Total margin (incl. crop worth) / Mainly animal manure. Excludes family labour 14

16 Table 5.8 Summary of livestock gross margins (Mean over all sampled households) Stock reconciliation and trading account for the year: 1 Jan to 31 Dec 2000 Pigs Goats Buffalo Chickens Ducks Number of farmers with n = type of livestock Total Nos. Total Nos. Total Nos. Total Nos. Total Nos. Opening Nos. Jan Purchases Gifted in Births Totals: Opening value Closing value Change in livestock value () (closing - opening) Income Cash sales Consumed Eggs (est.) Cash sales Own use / Worth of manure Change in valuation Total income: / Worth of manure used on crops Expenses Livestock purchases Feed Purchased feed Own feed (non-cash) Medicines Labour Transport Other Cash Non-cash Totals: Gross margin Cash / Total margin Feed purchased (kg) Feed grown on farm (kg) Labour per household enterprise days/year days/year days/year days/year days/year G. margin/labour day Cash / Total margin Note: 2 / Includes value of non-cash income and non-cash inputs 15

17 2.10 Summary of livestock gross margins (2000) Because livestock are not grazed on an area of land developed for forage production, no per mu profitability figures can be calculated for livestock enterprises. In situations where livestock numbers are sufficient to form a herd or flock, it is usual to calculate a gross margin per breeding female or per standard stock unit; this allows the profitability of different enterprises to be compared. However, when numbers of animals are small, as is the case for farmers on the Wulian apple project, calculations of this type are not feasible. In this situation, the only way in which enterprises can be compared are per labour day or per dollar of investment capital. Whilst we present per enterprise and per labour day gross margins, the labour input figures are only best estimates. Pigs and goats are enterprises carried mainly as a source of cash income, although pigs also utilise a significant amount of food crops grown on the farm. Buffalo are used as draught animals although, if they are females, they may produce cash income from the sale of progeny. Animal enterprises also produce animal manure that is valuable for cropping enterprises. Pigs are the most significant cash livestock enterprise for Wulian farmers, 93% of farmers monitored have pigs. The gross income net of livestock valuation readjustment is 1300, mostly from the cash sale of livestock (Table 5.8). By contrast chickens, ducks and geese are mainly carried for the domestic consumption, including eggs consumed on the farm (Table 5.8). Goats are mainly sold for cash income, although there is some farm household consumption. Over 90% of farmers have pigs, 72% have chickens, 32% have goats and 17% have at least one buffalo. The figures for other direct inputs in the livestock budgets for pigs and buffalo are high because they include some by-products such as maize stalk and wheat stalk for buffalo; and maize, sweet potato, sweet potato vine, soy bean cake for pigs (Appendix 4) Total income by source of income disaggregated by project activity On average, project farmers have gross farm incomes 40% higher than non-project farmers (Table 5.9). Table 5.9: Gross Farm Income by Project Activity Project activity Total farm income Percentage above non-project (cash and non-cash) farmers Grafters % Improved % management New planters % Non-project farmers 8565 n.a. All project farmers % 16

18 Total farm income is greatest for improved management (13736 ), followed by grafters (11699 ) and new planters, Non-project farmers have a gross income of 8565 (Table 5.9). Project farmers have a much higher income from apples than non-project farmers, and with the exception of new planters (who still have young trees) a higher percentage of total income is from apple production. New planters have an apple income about 1000 (68%) higher than non-project farmers. Grafters and improved management have apple incomes substantially greater, more than double the apple income of non-project farmers (Table 5.10). New planters have a significantly lower income from arable cropping than do grafters and improved managers, and their cropping income is similar to the non-project farmers. Non-project farmers are more reliant on off-farm income than grafters or improved management farmers. New planters are also more dependent on off-farm income, suggesting that off-farm earnings may be required to replace apple income lost during the period of new orchard development. Improved management and new planters have the highest livestock income off all the project activity groups (Table 5.10) Summary of key household indicators by project activity (2000 data) Cash farm income is significantly higher for improved management (up from 8833 last year); compared to 8742 for grafters (up from 6323 last year) and 8140 (up from 4320 last year) for new planters. By contrast cash income for non-project farmers is only The gross value of all income (cash and non-cash) is also significantly higher for project farmers compared to non-project farmers (Table 5.11). New planters have increased their income significantly in the last year compared to other project farmers as their apple crops come on-stream. New planters can be expected to have lower incomes at the start of the project because they are replacing mature yielding trees with new varieties, which will not immediately bear crops. Across project activities, net cash farm surplus is positive for all groups of farmers, but is significantly higher for project, than non-project, farmers (Table 5.11). Net off-farm income (off-farm income less off-farm expenditure) is greatest for non-project farmers and for new planters. The data suggests that farmers use off-farm earnings to meet their minimum income needs; farmers with the lowest net cash farm surplus have the highest net off-farm earnings. After taking into account off-farm earnings, the net cash household surplus is similar across all project activity groups of farmers but lower for non-project farmers (Table 5.12). 17

19 Table 5.10 Total income by source of income disaggregated by apple activity Apple activity: Improved New Grafters management plantings Non-project Source % % % % Apples % % % % Other fruit % % % % Crops % % % % Livestock % % % % Other farm % % % % Borrowings 0 0.0% 0 0.0% % 0 0.0% Off farm % % % % Totals () % % % % 18

20 Table 5.11 Summary of Key household indicators by project activity All data in Grafters Mean over all farmers n = 15 Grafters Cash Non cash Totals Gross farm income Gross profit (before tax & interest) Net profit (for living & reinvestment) Net farm surplus Net household surplus Improved management Mean over all farmers n = 13 Cash Non cash Totals Gross farm income Gross profit (before tax & interest) Net profit (for living & reinvestment) Net farm surplus Net household surplus New plantings Mean over all farmers n = 17 Cash Non cash Totals Gross farm income Gross profit (before tax & interest) Net profit (for living & reinvestment) Net farm surplus Net household surplus Non-project farmers Mean over all farmers n = 15 Cash Non cash Totals Gross farm income Gross profit (before tax & interest) Net profit (for living & reinvestment) Net farm surplus Net household surplus Total monitor farmers 60 19

21 Table 5.12: Net Cash Surplus, Net Household Surplus and Net Off-farm income by project activity Project Activity Net cash farm surplus Net cash household surplus Net household worth (cash and non cash) Off-farm income (net of expenses) New borrowing Grafters Improved Management New Planting Non-project farmers The value of consumption on the farm by the farm household is worth between 1400 and 1700, with the lower figure being for non-project farmers. Net worth of Household Surplus (cash and non-cash) is around 1400 lower for non-project farmers compared to project farmers (Table 5.12). 3.0 Time Series Data (1997 to 2000) 3.1 Comparison of key household indicators by project activity The data in each of the four years is presented firstly in nominal terms (the actual data recorded in each year) and then, for the key indicators, adjusted to real 2000 financial values. Over the period of the project, there had been an overall deflationary trend; so that the real value of one in 2000 is worth more than one would have been worth in 1997 (this is the opposite to the inflationary trend that has occurred in western market economies). The deflation values are based on the Consumer Price Index for Shandong Province (Table 5.13). One additional adjustment to the data has been made in order to compare the series in the final year of the project. Because the samples are quite small, for individual project activities, it sometimes happens that one or two farmers have some extraordinary expenditure in one year. The data is adjusted because large capital expenditure items can significantly distort the net farm surplus and the net household surplus calculated as an average over the sample of farms. In another situation, for example, two farmers paid large sums (in the off-farm expenditure account) to obtain citizen status in a township. When these sums are large, the expenditure incurred by one, or a few farmers, can cause large peturbances in the yearly data for small samples. Typically, our sample size, within an activity is 15 farmers. In order to make the data more comparable between years, the data is standardised by removing the large, atypical, expenditure items so that the residual figure is more typical of an average for the sample. These adjustments for extraordinary expenditure have been made to both the 20

22 nominal data and the real 2000 values presented here. The raw, unadjusted, data is included in appendix 5. Table 5.13: Consumer Price Index and deflation rates for Shandong Province (1997 to 2000) Consumer Price Index / / 2 Deflation % -6.8% Source: / 1 Derived from all-china rate and the trend in recent years for Shandong to mirror the all- China trend in rates. / 2 Estimated, based on 7 months data and all-china rate. 3.2 Nominal (Actual) values for the series: Gross farm income Between 1997 and 2000, gross income increased most, in percentage terms, for new planters (38% increase) followed by grafters (31%) and improved management (15%). Non-project farmers increased gross income by 12% over the same period. However, whilst improved managers only increased their gross income by 15% (compared to 12% for non project farmers) the value of their gross income was a lot higher than non-project farmers in 1997 and in The gross income for improved managers was in 1997 (a year after the project start) compared to 8565 for non-project farmers in Improved managers had the highest gross farm income off all activity groups at the end of the project, 13736, on average, per farmer (Table 5.14). Over the 4-year period, improved managers increased the nominal value of their apple income by 85% (from 2761 to 5121 ). The largest percentage increase in apple income was for new planters, a 308% increase from 1997 to 2000 but from a low base of 941 to 2896 (57% of the gross value when compared to the apple income of improved managers). Grafters increased the nominal value of apple income by 203% (from 1940 to 3941 ). By contrast non-project farmers increased the value of apple income by only 29%, from 1334 to 1724 (Table 5.15). 21

23 Table 5.14 Key household indicators by project activity for 1998 and 1999 After adjustments for extraordinary items of expenditure Grafters Improved New Non-project management Planters Gross income () Gross profit Net profit Net farm surplus (130) Net household surplus Value of changes in since 1997 Grafters Improved New Non-project management Planters Gross income () Gross profit Net profit Net farm surplus Net household surplus Percentage change compared to 1997 Grafters Improved New Non-project management Planters Gross income () 9% 2% 31% 16% 8% 29% -4% -20% 38% 2% -6% 12% Gross profit 0% 4% 43% 49% 39% 59% 6% -3% 79% -2% 5% 21% Net profit -1% 2% 41% 50% 38% 58% 4% -8% 75% -4% 1% 17% Net farm surplus - not calculated because large percentage changes result - not calculated because large percentage changes result Net household surplus from small changes in the values from small changes in the values Percentage difference compared to non-project farmers Grafters Improved New Non-project management Planters Gross income () 17% 25% 27% 37% 40% 60% 60% 60% 5% -1% -11% 29% 0% 0% 0% 0% Gross profit 35% 37% 33% 59% 23% 87% 64% 61% -9% -1% -15% 35% 0% 0% 0% 0% Net profit 36% 41% 37% 65% 23% 92% 68% 67% -9% -1% -18% 36% 0% 0% 0% 0% Net farm surplus - not calculated because large percentage changes result - not calculated because large percentage changes result Net household surplus from small changes in the values from small changes in the values 22

24 Table 5.15: Nominal value of apple production by project activity and year Activity Grafters Apple income % change (from 1997) - 35% 44% 203% % of gross farm income 22% 27% 31% 34% Improved management Apple income % change (from 1997) - 37% 43% 85% % of gross farm income 23% 29% 32% 37% New planters Apple income % change (from 1997) - -18% 16% 308% % of gross farm income 12% 10% 17% 26% Non-project farmers Apple income % change (from 1997) - -12% -30% 29% % of gross farm income 17% 15% 13% 20% Gross Profit Over the 4 years, improved managers and new planters increased the value of their gross profit (gross income less farm operating expenses) by 73% and 79% respectively. Gross profit for grafters increased by 43%. By contrast gross profit increase for non-project farmers increased by only 21% (Table 5.14). Operating expenses remained at similar levels between 1997 and 2000 for all activity groups with the exception of improved managers who actually decreased their operating expenditure. This group of farmers reduced their expenditure on livestock operating costs but increased their expenditure on apple operating expenditure, but by a lesser amount Net Profit Increases in net profit mirrors the increase in gross profit because the only items deducted from gross profit to give net profit are interest and tax. Interest payments are minimal for all farmers and the increase in tax was similar for all activity groups from about 160 in 1997 to 360 in Net Farm Surplus Net farm surplus is calculated after deducting family living costs, capital purchases and development expenditure and any principal payments. Farmers who plant new trees do not bear the capital cost of this development themselves so the costs of orchard development are not shown in the budgets for new planters. The township takes responsibility for the planting of the new trees and, when the tress start to bear fruit, the bearing trees are allocated to farmers. In addition, farmers have received some inputs from the project credit fund for which they have made no payments; these sums are relatively insignificant when averaged across farmers in the various activities in each year. Typical values for the free inputs are shown in table If farmers had had to pay for these inputs the value of farm surplus for 23

25 the typical average farmer in each activity would be reduced by the amounts shown in the table. Table 5.16: Value of inputs provide free to farmers from project funds by project activity and year (average per farm) Grafters Improved Management New Planters Between 1997 and 2000, the values for Net farm surplus have increased most for improved managers (by 2923 ), by 2709 for grafters and by 2410 for new planters. By contrast non-project farmers have increased the value of net farm surplus by only 686 (Table 5.14). Net farm surplus was 2793 for improved managers in 2000 (up from 545 in 1997), 3541 for grafters (up from 1685 in 1997), and 1889 for new planters (up from 861 in 1997). Non-project farmers had a net farm surplus of 714 in 2000; a 686 increase on the figure for Cash living expenses have remained fairly similar amongst all activity groups over the period, but given the reduction in real cost, this still represents an increase in living standard. Living costs are slightly higher for project than for non-project framers and the highest living cost is incurred by improved managers (average 2800 over the series), the most profitable farmers Net Household surplus Net household surplus is calculated after adding off-farm income and deducting off-farm expenses. Over the period of the data, off farm income has been more significant for the new planters and non-project farmers than for grafters and improved managers. This suggests that farm households make up any shortfall in income by increasing the amount of off farm work they do. Given the large differences in gross farm income, the difference between project activity groups in net household surplus is not great. For all project activities net household surplus averages 4067 per household in The figure for non-project farmers is 2677 (Table 5.14 after adjustment for extraordinary items). For the non-project farmers, the major increase contributing in the better net household surplus came from off-farm earnings rather than an increase in farm income. Over the period, net off-farm earnings increased for non-project farmers by 300% whereas net farm surplus increased by only 57%. 24

26 3.3 Whole household data converted to real 2000 values Deflating the data to 2000 values increases the relative rate of increase in net profit (and other key indicators) over the period of the project; this is because one in 1997 was worth less than one in 2000, in real terms. The key project impact on farm income is best described by the effect on net profit because this indicator is not affected by the peturbances caused by variations in capital expenditure, family living costs or in off-farm income and off-farm expenditure. The graphs in figures 5.5 (a, b, c, and d) show the deflation adjusted data by project activity. The project impact of increasing net profit is clearly shown, as is the relatively better performance of project farmers compared to non-project farmers. The graphs also show the lag of improvement for the new planters who have had to forgo income benefits until new trees start to bear crops. 3.4 Performance of apple varieties 6 year of age and over: comparison across years (1997 to 2000) Nominal values Table 5.17 shows the change in fruit tree crop performance over the 4-year period for varieties where the sample size is reasonable, for orchards with trees 6 years or more of age. As an average over the monitored farms, Fuji have increased in yield from 1745 kg per mu in 1997 to 3608 kg per mu in However, the price has fallen from 1.29 per kg in 1997 to 1.00 per kg in The gross margin over the same period has increased from 1562 per mu to 2304 per mu despite the fall in price per kg. The yield of New Red Star apples remained similar in 1997 and 2000, although in 1998 and 1999 the average yield was lower than in the first and final years in the series. Price per kilogram has dropped slightly from 1.01 per kg in 1997 to 0.92 per kg in In 2000, the gross margin for New Red Star apples reflected the fall in price, being 908 per mu in 2000 compared to 1162 per mu in The number of Guoguang apple growers has fallen from 27 in the sample of 60 monitor farms in 1997 to only 6 growers in Based on data adjusted to equate to 30 trees per mu, Guoguang yield has increased from 901 kg per mu in 1997 to 2090 kg per mu in 2000; but because there are a lot fewer growers of Guoguang in 2000, the performance of varieties may not be comparable. For example, the Guoguang grower sample is small and the remaining growers may have the best orchards. In 2000, there were only a few farmers with Chestnuts, Peaches and Hawthorn (ShanZha); so it is unlikely that the data can be considered typical and reliable for comparison. However, Peaches may be more profitable than Fuji apples. Chestnuts may be more profitable than New Red Star and Guoguang apples. 25

27 Table 5.17 Performance of apple varieties 6 years or more of age: Comparison between years ( ) Variety of apple n = Changes between years New Red Changes between years Changes between years Per mu Fuji 97 to to to 00 Star 97 to to to 00 Guoguang 97 to to to 00 Yield kg Price / kg Fertiliser kg Animal manure kg Chemicals Income 0 0 Cash sales H.Hold consumption Gross income Variable costs Cash items (a) / Non cash items (b) Total worth inputs (a + b) Gross margin per mu Cash margin Total margin (incl. crop worth) / Mainly animal manure. Excludes family labour 26

28 Table 5.17 (continued ) Performance of other tree crops 6 years or more of age: Comparison between years ( ) Other tree crops: n = Changes between years Changes between years ShanZha Changes between years Per mu Chestnut 97 to to to 00 Peach 97 to to to 00 (Hawthorn) 97 to to to 00 Yield kg Insufficient Insufficient Insufficient Price / kg data data data Fertiliser kg Animal manure kg Chemicals Income Cash sales H.Hold consumption Gross income Variable costs Cash items (a) / Non cash items (b) Total worth inputs (a + b) Gross margin per mu Cash margin Total margin (incl. crop worth) / Mainly animal manure. Excludes family labour 27

29 4.0 Recommendations for future monitoring systems Although the project began in 1996, we only have 4 years of monitoring data. It would have been helpful to have initiated the economic monitoring at the very start of the project and collected baseline data. The first visit of the monitoring specialist was mid way through 1997, when the data collection forms were designed and the survey implemented over a 2-week field visit. Statistical data is available on household incomes at the village and county level for 1995, and presumably for subsequent years. However, this data may not be comparable to the monitoring sample because project farmers rely more heavily on income from apple production than do other farmers. For example, in 1995, apple income comprised 4.2% of family farm income in the county and 5% in the project area (Smith, 1996); whereas, in 1997, apple income comprised 17% of farm income for non-project farmers, and between 12% and 23% for project farmers by Project monitor farmers may have had higher average incomes than the average, across all farmers, at the start of the project. Because the forms needed to be designed during the first visit, more field time would have been desirable during that first visit to train the technicians responsible for collecting the data and to allow the consultant to participate in the collection of the first year s data. Alternatively, a second field visit by the consultant during the first year would have allowed more supervision in the collection of data, and for training. In the first year in particular, there were problems in aggregating the data into data tables suitable for data analysis. This occurred because PMO staff entered the data into spreadsheets that looked like the survey sheets rather than into data tables where the columns contain the variable names and the rows the individual farmer records. It is unclear who gave instructions for data entry to proceed in this manner, but it occurred without discussion with or the agreement of the monitoring specialist. This led to additional work for the monitoring specialist in collating and aggregating the data and to some inaccuracies in the data, initially at least. This problem persisted in the second year and has resulted in data entry inefficiencies subsequently. It is important to ensure continuity in the supervision of the monitoring programme and to make sure procedures are agreed by the monitoring specialist before implementation. In the second and third year of the data analysis, non-cash family living costs were treated inconsistently in the presentation of the data by project activity. In the first year, non-cash family living costs (consumption of farm produce by the farm family) were included as a non-cash expense, whereas, in the second and third year, this expenditure was part of the calculated net farm and net household surplus. In this report, this figure is itemised as a separate non-cash item in the whole household budget and included as part of total family living costs in the totals for comparison across years. To limit the resources required to collect the data, only 60 farmers in all were sampled. This allowed for the collection of data from 15 farmers in each of the three project activity groups and from 15 non-project farmers. The non-project farmers consisted of apple growers who practiced one or more of the project activities of grafting, improved orchard management and new planting. 28