Friday, May 13, 2011

Rice Strategy: Industrialization or Planning?

An article on the China Grain Net web site describes the Sinograin Company's efforts to implement the official strategy for modernizing Chinese agriculture in Hunan Province's rice industry. While the strategy could have been cobbled together in an MBA classroom, its basic elements bear great similarity to pre-1980s collective agriculture dressed up in industrial clothing. Is this a step forward toward a market economy or a disguised return to central planning?

Sinograin is the Chinese government's company in charge of maintaining grain reserves. Its widespread network of subsidiary companies operate warehouses, purchasing stations, and grain mills in major grain-producing areas. Hunan is one of the top rice-producing provinces. Sinograin has a branch in Hunan with 38 local subsidiaries. Sinograin also controls the China Grain Net web site where the article appears. The article is basically advertising Sinograin's approach to encourage wider adoption since this is a "model" program. The methods described have been appearing in many government-sponsored articles and policy statements this year. While the article is propaganda, it gives a concrete example of what Chinese authorities are trying to do to upgrade the quality of grain, improve productivity, reduce toxic pesticide residues, and rationalize fertilizer use.

The strategy emphasizes the formation of a "complete industry chain," from field to table that integrates input supply, production, purchase, processing, packaging, branding and distribution to consumers for a "multiple win" industry.

The strategy integrates the local Shengxiang ("Flourishing Hunan") company with a Ministry of Agriculture project to create a "1 million mu quality rice corridor" in an area surrounding Changsha, the capital city of Hunan. State bonds funded new rice storage facilities and a 200,000 mt rice-milling plant was constructed as part of the project.

The strategy bears many similarities to pre-1980s collective agriculture. The "company + base + farmer" strategy includes forming scattered plots into large contiguous fields where farmers use the same inputs and seeds, apply pesticides in a coordinated manner, plow and harvest together, and jointly market their rice to the local Sinograin subsidiary.

The project apparently aims to bring "order" to rice marketing by linking companies directly with farmers and purchasing rice under contract. The chairman of the Shengxiang company explains that they have set up local purchase stations where farmers can "conveniently" deliver rice. In the demonstration area each village authorizes 3-to-5 individuals as rice purchasers. The villages rice fields are divided up and each purchaser is allocated an area where he/she is authorized to purchase rice.

Delivering rice to the company in Hunan.

The government sees itself as unable to provide the services farmers need, so its strategy is to rely on companies and cooperatives to perform the function of extension service--spreading seeds, techniques, inputs, and training--with help from the government.

The article about the Shengxiang company emphasizes the role of a model cooperative that was set up by the company two years ago. It makes sure to note that various provincial and Sinograin leaders have come to inspect the cooperative and pay a lot of attention to it. The cooperative has received many awards and is designated as a model cooperative.

The cooperative uses a "five unified" strategy to standardize and coordinate the farmers' production and marketing. [This is standard rhetoric repeated by virtually all Chinese cooperatives.] They formulated a variety plan that determined which varieties should be planted in each area. Each township set up pest control teams, everyone used the same low-toxicity pesticides and they applied them in a coordinated manner. The cooperative set up a pesticide sales network. Extension stations provided the cooperative members with soil fertility testing to determine appropriate fertilizer formulas, and fertilizer was purchased in bulk at discount prices. The cooperative formed machinery service teams and carefully planned which fields would be plowed or harvested each day. The cooperative members jointly market their rice to a miller who produces a brand of rice named after the cooperative.

Personnel from China Grain Net visit the cooperative's high-grade rice demonstration area

The article highlights four large grain farmers who are models for others to emulate. These farmers got special soil fertility testing and instruction and received fertilizer delivered directly to them. The cooperative offers grain-drying services to solve the large farmers' problem of drying grain in the sun [farmers typically spread their rice on a road, courtyard, basketball court or other open space to dry in the sun--large farmers probably can't find a big enough space to do this.]

Mr. Zhou Yi, the party secretary and general manager (in that order) of the Hunan branch of Sinograin lauds the cooperative as a bright spot and breakthrough in modern agriculture that promotes increased grain production, higher income, pulls along farmers, stablizes grain prices, and makes a needed contribution to social harmony.

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