Shandong report: USDA FAS

The USDA FAS has published a report on Chinese horticultural production, focusing on the Shandong province. Roberta Cook, economist at UC Davis, passed along the report, which was composed with the help of one of her former students. Here are a couple of highlights from the report:

On the challenges for China....

A further distinctive quality of China’s domestic horticulture market structure is the lack of traceability with regards to food safety. Though the Administration for Quality Supervision, Inspection and Quarantine has recently implemented mandatory orchard, packing house, and processing facility registration for all fruit destined for export markets, the domestic market is still lacking quality control measures. In the majority of cases, the thousands of small-scale farmers selling to hundreds of local brokers and wholesalers are still largely unaccountable for the quality of their produce.



On vegetable growers...

There is no distinction among farmers in the level of wealth between vegetable and non-vegetable growing households. China’s markets allow equal access to emerging horticulture¹ activities. In 2006, the average cucumber producer’s household assets (on a per capita basis—not including the family’s house) were $992, for non-cucumber producing households $986 and for tomato producers $1,131, for non-tomato producing households $1,164. The lack of significant differences in assets suggests that there are no entry barriers for farmers to switch to the production of vegetables.

Vegetable farmers in Shandong normally grow several crops. Major crops are maize, wheat, cotton, peanuts, and vegetables. Within the vegetable category, farmers do not limit themselves to one type. Simultaneously planted vegetables in both greenhouses and open fields, include: Chinese cabbage, peppers, eggplant, string beans, cucumbers, and tomatoes.

Vegetable production is more labor intensive than other types of farming therefore, the availability of family labor is fundamental for farmers who choose to move into vegetable production. Households with a smaller percentage of laborers with off-farm jobs are more likely to produce vegetables because of the physically demanding nature of vegetable production. In Shandong (and elsewhere in China), there are no stable agricultural labor markets so when a farmer commits to vegetable production, he commits to spend less of his own and his family members’ time off the farm. Most farmers, however, have limited off-farm employment options. This implies that for those households who are not able to participate in off-farm employment, the expansion of China’s vegetable market provides a new employment opportunity.

On fruit growers....

Similar to vegetables, wealth has little effect on the decision to produce fruit but off-farm employment does impact fruit production. Lower-levels of household off-farm employment are seen on Shandong’s fruit farms. Households producing fruit actually had lower per capita assets than non-producing households, indicating that poorer farmers are not being left out of horticulture production. In 2001, the average apple producing households’ assets were $616.30, non-apple producing $734.70 and the average grape producing households’ assets were $787.70, non-grape producing $896.10. Like vegetable production, the labor intensive nature of fruit production is the reason fruit producing households have lower levels of off-farm employment.

China’s government provides some support for apple but not grape production. During the 1980s, this government support led to large production increases through expanding apple orchard area and encouraging farmers to shift production of other crops (grains, fibers, and oilseeds) to apples. The government encouragement occured in three ways: providing grants and loans to farmers, reducing in-kind grain taxes, and introducing new varieties (Zhang, 2005). This promotion program led to a staggering increase in apple production and nearly quadrupled production between 1990 and 1996 from 4.3 to 17 million tons (China’s Ministry of Agriculture, Online Database). However, the support program was viewed as a failure by government and industry because the dramatic increase in supply depressed both domestic and world apple prices. The growth in apple production has since leveled off with total production in 2006 at 26.1 million tons, a 50-percent increase over the ten year period, 1996-2006. Grape production, not supported by government programs, has risen steadily during the period from 1990 to 2006 from 0.86 to 6.3 million tons, a more than sevenfold increase. This increase occurred without government support.

Unlike vegetable production, farm size is not a factor in fruit production. There is no significant difference in the size of fruit versus non-fruit producing farms in Shandong. Fruit production in Shandong Province has increased since 2001. In the case of apples, this growth has come from an increase in average farm size from 0.18 hectare in 2001 to 0.19 hectare in 2006, as well as better farm management and an increase in farm inputs. The growth in grape production stems from a 14-percent increase in the total number of grape farmers from 2001 to 2006, there was no increase in average farm size for grape producers.