The Development of Smallholder Inclusive Business Models in China Prepared by Gu Rui AII/CAAS December,2015. Hanoi
Contents 04 21 24 Page Status Literature Focus 1 2 3
The new term The new term of smallholderinclusive business model Different terms but similar contents
Topics Q1: How has the development of smallholder-inclusive business models in China been? Key players Benefit risk sharing mechanism Outcomes Government policies Leading agricultural companies Farmers cooperatives
1. Key players Organizations to integrate smallholders to markets: I. Leading agricultural companies II. Farmers organizations III. Agricultural specialized markets
Key players 400 350 300 250 Agricultural specialized markets Farmers organizations Leading agricultural companies Number of organazitions (thousand) 120% 100% 80% 200 60% 150 100 50 40% 20% 0 1997 2001 2005 2009 2013 0% Data source: China agricultural development report
2. Benefit-Risk sharing mechanism Mechanism to share benefits and risks between smallholders and key players I. Contracts II. Joint venture III. Cooperation
Benefit-Risk sharing mechanism Contract Joint venture Cooperation Others Contracts are mainly used to link the smallholders and partners, and 46.4% of which were contract farming in 2009. 98% or above of organizations has formed partnership with smallholders using contracts, joint venture or cooperation in recent years. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2001 2003 2005 2007 2009 Data source: China agricultural development report
Business model Smallholder Market Company + Smallholder Company + Farmers cooperative + Smallholder + wholesale market supermarket consumer Farmers cooperative + Smallholder
3. Outcomes Smallholder inclusive in the value chain 140 120 Increased income(yuan) Smallholder inclusive(million) 3500 3000 100 2500 80 2000 60 1500 40 1000 20 500 0 2001 2003 2005 2007 2009 2011 2013 0 Data source: China agricultural development report
4. Government policies The government has attached importance to the development of smallholder inclusive value chain since it tried to find a way to help the smallholders integrate into the markets in the 1990s. The law on farmers cooperatives was promulgated in 2006 and came into effect in 2007. The first comprehensive policy guideline for supporting the development of leading agricultural companies was issued by the State Council in 2012.
Government policies Law and regulations Personnel training Financial support Agricultural projects
5. Leading agricultural companies 140 50% 120 100 80 45% 40% 35% 30% 25% 60 20% 40 20 Number(thousand) Share in organizations 15% 10% 5% 0 2001 2003 2004 2005 2007 2008 2009 2010 2011 2012 2013 2014 0% Data source: China agricultural development report
Leading agricultural companies Technology innovation Base construction Processing Marketing Export
Leading agricultural companies The general information of leading agricultural companies in 2013 R&D Investment on R&D ( billion Yuan) 58.732 Personnel for R&D (num.) 870500 Have R&D centers (num.) 16700 Have awards from province or above (num.) 9958 Value added Investment on base construction ( billion Yuan) 385.809 Quality Total sales revenue ( trillion Yuan)1 7.86 Total value of purchasing agricultural raw materials ( trillion Yuan)2 3.41 Ratio of 1 and 2 2.3:1 Investment on quality testing, quarantine and certification ( billion 37.161 Yuan) Have quality system certification 30800 Have famous brands 12400 Data source: China agricultural development report
Leading agricultural companies Eligible national key leading agricultural companies after sixth monitoring 100 90 80 70 60 50 40 30 20 10 0 Beijing Tianjin Hebei Shanxi Inner Mogolia Liaoning Jilin Heilongjiang Shanghai Jiangsu Zhejiang Anhui Fujian Jiangxi Shandong Henan Hubei Hunan Guangdong Guangxi Hainan Chongqing Sichuan Guizhou Yunnan Tibet Shanxi Gansu Qinghai Ningxia Xinjiang
6. Farmers cooperatives Farmers cooperatives registered in industrial and commercial department 1400 1200 1000 800 600 400 200 Number(thousand) Ratio of members of farmers cooperatives to total households 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0 2009 2010 2011 2012 2013 2014 0.0% Data source: China agricultural development report
Farmers cooperatives Farmers cooperatives have covered main agricultural products such as grain, cotton, oil, meat, egg, milk, fruits, vegetable and tea, and gradually extended many other fields including machinery, plant protection, folk handicraft and agro tourism. However, the fields are relatively concentrated on crop farming and breeding industry, and their shares were 45.8% and 28.5% respectively in 2012. 25.70% 28.50% 45.80% Crop farming Breeding industry Processing+Service industry Data source: China agricultural development report
Farmers cooperatives Vertical and horizontal coordination Standardized, intensive, specialized and branding production Farmers income increased Strengthened cooperation awareness
Farmers cooperatives Land transfer into farmers cooperatives: 4,600,000 hectares, accounted for 20.4% of total area of land transfer Has standardized production: 65,000 Has trademark register: 60,000 Has quality certification: more than 30,000 The general information of farmers cooperatives in 2013 Data source: China agricultural development report Machinery cooperatives: 41,000 Members: 1,520,000 Land area: 8,000,000 hectares Services for households: more than 45,000,000 Services for land: 50,000,000 hectares, accounted for 13% of total machinery service area
Topics Q2: Has there been much research on this topic? And has the literature review covered key aspects? Literatures (paper number)
7. Literatures There have been a lot of studies on smallholder inclusive value chain but with different key words contained in the titles. I. Agricultural integration (vertical and horizontal coordination) I. Leading agricultural company II. Farmers cooperative III. Farming Supermarket Docking
Papers number Papers number in the journals of CNKI with different expressions contained in the titles 1200 Farmer cooperative 1000 Leading agricultural company 800 Agricultural integration "Farming Supermarket" Docking 600 400 200 0 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Topics Q3: What sector would you focus on your case studies? Priority
8. Focus sector Our team would like to focus on the livestock sector in our case studies based on the knowledge about meat industry and earlier studies on beef value chain. I. Dr. Nie is an expert in meat value chain analysis II. Our team participated in the agricultural research on beef value chain in 2015.
pork sector Output* (million tons) Per capita consumption of urban residents** (kg) Per capita consumption of rural residents ** (kg) Exports* (million tons) Imports* (million tons) Price* (RMB/kg) 2001 40.52 15.95 13.35 0.17 0.20 10.26 2003 42.39 20.43 13.78 0.31 0.31 10.48 2005 45.55 20.15 15.62 0.39 0.20 12.09 2007 42.88 18.21 13.37 0.27 0.47 16.77 2009 48.91 20.5 13.96 0.18 0.53 15.87 2011 50.53 20.63 14.42 0.19 1.35 22.87 2013 54.93 20.4 19.1 0.17 1.40 21.04 Data source: * come from China agricultural development report ; **come from China statistical yearbook
Beef sector Output* (million tons) Per capita consumption of urban residents** (kg) Per capita consumption of rural residents ** (kg) Exports*** (1000 tons) Imports*** (1000 tons) Price* (RMB/kg) 2001 5.086 1.92 0.55 21.33 3.86 13.04 2003 5.425 1.98 0.5 8.87 8.14 14.72 2005 5.681 2.28 0.64 19.11 1.14 16.1 2007 6.134 2.59 0.68 28.34 3.64 19.77 2009 6.355 2.38 0.56 13.40 14.16 29.09 2011 6.475 2.77 0.98 21.98 20.16 33.42 2013 6.73 2.2 1 0.8 5.87 294.22 51.71 Data source: * come from China agricultural development report ; **come from China statistical yearbook; *** come from UN Comtrade Note: 1 for the third column, the statistical entry in 2013 was different from those in other years.
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