Liu Shinan

Tilt the profit balance in farmers' favor

By Liu Shinan (China Daily)
Updated: 2009-12-16 07:22
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There have been two pieces of news about dramatic price fluctuation of agricultural products recently. One is the 20-fold year-on-year rise in the price of garlic, and the other is about banana price in the Guangxi Zhuang autonomous region falling to 0.4 yuan from last year's 1.5 yuan a kg. The People's Daily reported on Monday that traders purchased garlic from farmers in Shandong province at 4.4 yuan a kg while the price was 0.6 yuan a kg in May.

Normally, I do not pay much attention to fluctuations in grocery prices because I am not the cook in my family. So to find out about the price changes, I did a small investigation yesterday at a supermarket near my home. I found that garlic sold for 12 yuan and bananas for 4 yuan a kg.

As a consumer, I certainly dislike any price rise. But the thought that my rural cousins (I have worked and lived in the countryside for 10 years) could benefit from the higher prices of farm products soon put my mind at ease. My heart would not ache if the extra money I paid ended up in my fellow countrymen's wallets. And I believe most urban consumers would accept the burden without too much grievance.

The problem, however, is whether the money really finds its way into the farmers' pockets. We urban residents want to know.

According to the People's Daily report, most garlic glowers disposed of their products when the price rose to 2 yuan a kg. And that was exactly the production cost. Given this fact, we can conclude that the intermediate traders between the producers and consumers grabbed the largest part of the extra profits generated from the rise in the price, with only a small number of farmers making a little more money.

Although the traders paid the costs for purchasing, transporting and processing the garlic, it is inarguable that they took the lion's share of the profits, too.

Since China took to the road of market economy, there has been no consensus on whether the middle links between producers and consumers have pocketed most of the profits. Two years ago, when I wrote a column on the same topic, I felt frustrated at the lack of authoritative data on the problem.

Early last year, finally some departments began investigating the matter. In May 2008, the National Development and Reform Commission, the Ministry of Commerce and the Ministry of Agriculture conducted a "close follow-up" investigation into the profit distribution of nine products flowing from the field to the market.

According to media reports, the investigation concluded: "In general, the profits made by the wholesale and retail links are excessively high." An investigation conducted by the Ministry of Agriculture before the joint probe had reached a similar conclusion.

But more noteworthy is the conclusion reached by the joint investigation team from the three government departments, which states: "While farmers suffer from the fluctuation in the prices of farm produce, the middle links enjoy a relatively stable profit-earning. For instance, chili growers began to make profit this year after suffering a 31 percent loss last year. But the profit rates of the wholesale and retail agents have remained between 28.7 and 34.1 percent, while that for supermarkets has been between 89.5 and 96.8 per cent."

This means that although farmers can make some profit from rising prices, the profit in general is limited if the losses they have suffered previously are taken into account.

But the middle agents have a guaranteed income both on sunny and rainy days. In other words, farmers take the risk while traders count the money.

Something has to be done to change this situation.

The responsibility rests on the government. It has made a good beginning by conducting an earnest investigation into the profit distribution.

Now it needs to reverse the unfair trend to bring real benefit to farmers, who are the largest potential force to propel domestic spending.