2003 -- CropChoice news --Financial Times, 09/30/03:
The highway out of Taiyuan, capital of landlocked
Shanxi province, winds through miles of rough, denuded
hills, a man-made moonscape stripped bare by loggers
and then washed clear of fertile topsoil by erosion.
It is the kind of scene that alarms leaders such as
Wen Jiabao, China's premier, who recently called for
the "strictest measures" to prevent the further
loss of valuable farming land to factories and logging.
But as you swing down into the alluvial plains, a different
landscape emerges, of fields thick with corn and ripe
- in the eyes of a growing band of foreign investors
- for a host of new cash crops.
"China can be Asia's farm and kitchen," says
Ian Neeland, an Australian agronomist based in China
who has just launched a project in Xinzhou county, near
For many countries already rattled by China's emergence
as the manufacturing "workshop of the world",
the prospect that it could also become a significant
farm exporter will be unwelcome news.
But it is a vision shared by a growing band of investors
who believe China's cheap labor, good available soils
and proximity to valuable markets make for a good business.
"Countries like Japan and South Korea can no longer
afford produce air-freighted from the US and Australia,
or from their own farmers," says Mr. Neeland, head
of Greenfields, a regional investment group in China.
Foreign investment in Chinese agriculture is tiny compared
with manufacturing each year, but is welcomed by a central
government perennially struggling to quell rural unrest
and boost falling farm incomes.
But modernization of the agricultural sector, which
employs about two-thirds of China's 1.2bn population,
is a double-edged sword for the government.
While the introduction of modern farming methods and
technology has the potential to lift some salaries and
increase crop yields, it may force the consolidation
of small farms and push millions of families into ill-prepared
China is particularly vulnerable to competition in
cereal and staple crops such as rice, wheat and oilseeds
following its entry into the World Trade Organization.
In vegetables, however, such as sweet corn, peppers,
mushrooms and leeks, Chinese exports to countries such
as Japan and South Korea are already large enough to
have prompted a backlash from farmers in those countries.
Local sales are also rising to a growing Chinese middle
class market demanding better quality and safer foods
and more convenient forms of packaging, all skills that
can be marketed in China from overseas.
In Shanxi, Mr. Neeland has teamed up with Syngenta,
the listed Swiss agribusiness and seeds giant, to grow
sweet corn and, in a separate venture, iceberg lettuce.
Both crops are relatively new to China.
The venture's main customers initially will be KFC,
a unit of Yum Brands, the US fast-food company, which
is opening about 100 stores a year in China.
KFC's expanding presence in China, and that of companies
such as McDonald's, another fast-food giant, is already
transforming agriculture, sparking new crops and the
standardization of their harvesting and production.
While big buyers such as KFC provide little profit
because of their power to demand low margins, their
large volume purchases can provide businesses such as
Greenfields with important cash-flow.
They also provide a quality benchmark that helps sales
overseas, and to China's own fast-growing supermarket
and fresh packaged foods industries.
Japan's sweet corn market alone is worth $400m (€365m,
£255m), according to Greenfields research.
For companies such as Syngenta, much of their business
is akin to adult education, convincing farmers that
their superior seeds and herbicides are worth the expense
over local products, and then making sure they are used
in a way which does not damage the land.
"We have to basically try to invent our business
here," says Gérard Renou, head of Syngenta's
vegetable and flowers division. "We have to be
closely involved with all the players making decisions
- otherwise you can't commit yourself in a way that
the customer expects."
The starting point is the farmers themselves, who have
to be persuaded they can make more money by growing
new crops such as sweet corn.
A Syngenta survey in 10 provinces found 48 percent
of farmers considered themselves to be in business,
a number the company considered to be relatively high.
Barely one in 100, however, had structured their farms
as companies, and about 68 percent of households had
to look elsewhere, to laboring jobs in cities, for example,
for more than half their income.
In Xinzhou county, Guo Yushu, a farmer with an annual
income of about Rmb5,000 ($605, €552, £365),
admits he struggled to talk the 30 fellow workers in
his village into switching crops to plant sweet corn.
But it has so far paid off. "We can increase our
income," he says. "To be rich is a good thing
in every aspect, for the family and for society as a