Selling produce at a loss is best desperate vegetable growers can hope for, Duan Yan in Shandong province and Hu Yongqi in Beijing report.
Last year was better for Xu Yuguang, a Shandong farmer. The price of Chinese cabbage rose to 1.6 yuan (25 cents) per kilogram and he made a tidy profit. This spring, he got only 0.14 yuan each for his 15,000 kg of new harvest.
His family had worked hard for months to cultivate the crop and he lost 0.16 yuan for each kilogram he sold.
“The three mu (0.2 hectare) of Chinese cabbage cost me about 4,500 yuan to grow,” said Xu, 41. A wry smile tugged at his mouth as he loaded cabbages from the field to his motor tricycle. “Now I’m selling them at 2,100 yuan in total.” That’s about $690 in cost and $322 in revenue.
Even so, Xu considers himself lucky. He managed to get rid of his cabbages before they started rotting. Some of Xu’s neighbors found no buyers.
The sudden drop in wholesale prices this spring hit vegetable growers across the country, although consumers in the cities would not know it. The Ministry of Commerce said the wholesale price of 18 types of vegetable dropped an average of 9.8 percent last week from the week before and 16.2 percent over three weeks.
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The National Bureau of Statistics said on Monday that Chinese cabbages were selling wholesale at 1.79 yuan per kg. A year ago, the price averaged 2.8 yuan.
Farmers have crushed the vegetables and tilled them into the soil or fed them to livestock. The land needs to be cleared for the next round of planting. But many farmers said they have no idea what to plant next.
The heavy loss proved too much for Han Jin, 39, a farmer in Jinan, capital of Shandong province. The price of the cabbage he grew, a different variety from Chinese cabbage, dropped to 0.16 yuan per kg. He committed suicide on April 16.
Many voices in the marketplace lay the blame on the relatively warm and sunny winter that led to bigger harvests, but experts say weather is only one of the factors that cause prices to plunge.
‘Dead cheap’
In Dongxia township of Qingzhou city, where Xu lives, almost all the farmers in his village and others nearby had planted Chinese cabbages in their greenhouses. Xu paid 900 yuan – more than 40 percent of his revenue – to the workers he hired for the harvest.
“The vegetables are dead cheap but laborers are more expensive. I also need to provide their lunches.” Xu sighed deeply as he said he had no clue why cabbage is so cheap this spring. “Even a plate of fried cabbage in the restaurant costs 10 yuan.”
A large truck was parked on the roadside, waiting to ship Xu’s vegetables to the vegetable wholesale market in Shouguang city, 50 kilometers away. The market, one of China’s largest of its kind, was built in 1984 in response to an oversupply of cabbage. The year before, 25,000 tons of unsold Chinese cabbage ended up rotting on the ground. The idea behind the market was to concentrate the produce in one place and make it easily available for potential buyers from neighboring cities.
“I’ve never seen the price of vegetables so low before,” Chen Jianquan, 32, said on Saturday as he lay in his cabbage-filled truck. The vegetable grower had been at the market waiting for buyers since 1 am. It was afternoon, and he had sold less than half of his 1 ton of cabbages.
“I can’t leave until I sell these cabbages, because after another two days, the price will drop even more when the vegetable is not as fresh,” Chen said. He looked with envy at dealers 20 meters away. “Looks like they just sold theirs.”
The successful dealer, who gave only his surname, Wang, said he and his driver had been at the market since the day before.
Cutting the links
Despite the losses to farmers and dealers such as Xu and Chen, consumers have not yet benefited from the low wholesale prices.
Liu Chang, who lives in Beijing’s Chaoyang district, said she had read about cheap vegetables being thrown away like trash. “At the groceries downstairs, I’m still paying 2 yuan per kg for cabbage.”
The latest figures from the National Bureau of Statistics, released on Monday, show Chinese cabbage selling in 50 cities for 1.79 yuan per kg April 11-20. The price was 1.75 yuan in the same period last month.
Cheap agricultural products don’t equate to cheap food on the dining table because there are many intermediaries between farm and bowl. As the prices of petrol and labor have risen over the past several months, the costs of harvesting, packaging and transporting produce have stayed high. The State Council has repeatedly ordered local governments to reduce the intermediate links for agricultural products.
Xu and other farmers said the threshold for providing goods directly to supermarkets is still too high and complicated for individual farmers like themselves.
Who’s responsible?
Li Guoxiang, a researcher with the Rural Development Institute of the Chinese Academy of Social Sciences, said that government measures to curb inflation have contributed to the plunge in prices paid to vegetable farmers and that they will affect more agricultural products later this year. For example, when the government limits price increases to consumers, it means that prices paid earlier in the production chain are limited too.
Lin Donghua, a researcher with the Economy Institute of Shandong Academy of Social Sciences, said this year’s decrease in cabbage prices follows years of increase. In the past two years, Lin said, the rising price of Chinese cabbage drove farmers to grow more.
Sun Jixiang, secretary-general of the Shandong Vegetable Association, said acreage devoted to cabbage didn’t increase that much in the province. Farmers there planted more than 233,300 hectares in cabbages in 2009 and about 246,700 hectares last year, roughly a 5.7 percent increase. He said farmers shouldn’t be blamed for the price fluctuations.
Cabbage production in South Korea nose-dived 30 percent last year as a result of bad weather, which boosted cabbage exports from Shandong province. South Korea suspended a 30 percent tariff on Chinese cabbage from Oct 14 to Dec 31 to help maintain adequate supplies for kimchi, the national dish. It is made of cabbage fermented in white radish and chili paste seasoning.
The South Korean cabbage crisis also led to a sudden rise in the price of cabbage sold in China, and some vegetable dealers and speculators manipulated supply in anticipation of an even bigger increase. They pulled many cabbages from the market and put them into freezers.
Stinky losses
Now, the foul smell of rotten cabbage drifts from some freezers at Shouguang, prompting passers-by to cover their noses. Workers at Hualong Storage Co the other day were cleaning freezers and piling bags of cabbages outside the parking lot.
Lu Wenguo, the company’s general manager, said a customer from the neighboring city of Zibo had abandoned 600 tons of cabbage without paying the balance of a 20,000 yuan storage fee. “Now his cell phone is turned off,” the manager said.
The storage company itself stored 1,000 tons of cabbages bought for 0.7 yuan per kg, and managed to sell only one-third of them, at a loss. The price held steady, Lu said, but did not cover the added expenses of transportation and packaging and storage fees. Breaking even, he said, would have required an increase to at least 1.6 yuan per kg.
Then there is a 40 percent loss in the freezers, Lu said. “When you put two cabbages in, you can only take one out because the outside layers of the vegetables will be spoiled already.”
Lu, who also is founder of shucai001.com, a vegetable industry website for Shouguang, said at least 40 to 50 freezers in the city had stored cabbages and all of them sustained loss to some degree.
Lin, the Economy Institute researcher, said private capital to speculate on agricultural products retreated from the market this year, leading to the burst of “bubbles in vegetable prices”. Speculation last year pushed up prices on produce such as garlic, apples and mung beans.
Demand for some vegetables has been affected recently by the radiation leak at Fukushima Daiichi nuclear power plant in Japan, said Li, the rural development researcher. Some consumers fear contamination of leafy vegetables, including Chinese cabbage, rape and spinach, grown in China.
Just 150 km west of Dongxia town, farmers in Tangwang town of Jinan are throwing away their spinach or feeding it to chickens and pigs. Shandong Business Daily reported that spinach, which went for 1.2 yuan per kg 20 days ago, was selling at 0.12 yuan last week.
Suggestions, actions
Li said farmers don’t know much about the market-regulating mechanism. Their inability to forecast the relation between demand and supply makes them more vulnerable to dramatic price fluctuations. For that, better information channels need to be built.
Yao Jian, spokesman for the Ministry of Commerce, said on Saturday that the ministry had issued an urgent notice requiring all commerce departments nationwide to take measures to maintain a stable vegetable market. He said commerce authorities would improve information services to help farmers find buyers.
In Shandong, some supermarkets, school canteens and company dining rooms were ordered to buy vegetables locally. The provincial government urged them to help relieve farmers of an oversupply of vegetables.
Li further explained that farmers need to unite to avoid risks. Sun, of the Shandong Vegetable Association, shared the same view and said associations can connect farmers with the market and guide them to avoid oversupplies.
Meanwhile, farmer Xu Yuguang encouraged his neighbor Li to talk to a China Daily reporter as well. Li’s vegetables are still in the field waiting for buyers. “You should talk about it so people will know, so they will come to buy our vegetables,” Xu said.
Li, who declined to give his full name, pointed at his vegetable greenhouse: “My celery is selling at less than 0.2 yuan per kg now.”
By Duan Yan in Shandong province and Hu Yongqi in Beijing (China Daily)
http://www.chinadaily.com.cn/bizchina/2011-04/26/content_12397602_2.htm