Opportunities Arise for Farmer Cooperatives to Develop Processing and Distribution
Editor's Note
This year's No. 1 Central Document proposed “implementing and improving relevant tax preferential policies to support farmer cooperatives in developing agricultural product processing and distribution”, drawing a clearly directed and distinctly outlined roadmap for farmer cooperatives under the new situation. Recently, relevant comrades from the Agricultural Product Processing Bureau of the Ministry of Agriculture went to a grassroots contact point——Haibin Cooperative in Liyang City, Jiangsu Province, for an inspection, and also inspected other relevant cooperatives and agricultural product processing enterprises, carrying out research on the situation of farmer cooperatives developing agricultural product processing and distribution. The research results are now published here for practitioners' reference.
Core Highlights
China's modern agriculture construction faces a trend of diminishing marginal effects in the three areas of policy, science and technology, and investment. We must abandon the fixed mindset of focusing only on planting and breeding and only on production, and, on the basis of continuing to stabilize production, vigorously develop post-production processing and distribution, tap into the multi-format and multi-functional profits of agriculture, seek new paths for China's modern agriculture construction, and build a new engine.
For farmer cooperatives to develop agricultural product processing and distribution, shifting from cultivation and harvesting to integrated production, processing and sales and integrated trade, industry and agriculture, is the general direction and general trend, a positive measure to respond to the diminishing marginal effects of agriculture and seek a development path, and even more an inevitable choice. With the fission-style development of farmer cooperatives, the development of pre-production and mid-production profits such as cultivation and harvesting has gradually become saturated. Developing post-production links such as processing and distribution, extending the industrial chain, and broadening profit space have become important ways for farmer cooperatives to develop in a standardized way and transform and upgrade.
Annual rice processing of 10,000 tons, profit of 1.4 million yuan——
Haibin Cooperative Embraces a “Golden Doll”
In 2006, Wang Haibin, a veteran from Bieqiao Town, Liyang City, Jiangsu Province, joined with 27 agricultural machinery operators and registered and established Haibin Agricultural Machinery Cooperative by contributing agricultural machinery as membership shares; in 2009, on the basis of this cooperative, Haibin Grain Crop Cooperative was also established. Its business scope gradually expanded from the initial land plowing and agricultural machinery land preparation services to the entire industrial chain, including seedling cultivation, rice transplanting, plant protection, mechanical harvesting, drying, processing, and sales, and it also transferred land and launched rice under its own brand, becoming a new type of agricultural operation entity of considerable scale locally. At present, the agricultural machinery cooperative has 114 member households and possesses 269 units/sets of various agricultural machinery, including 17 large and medium tractors, 54 rice transplanters (32 ride-on), 18 high-performance sprayers, 11 semi-feed combine harvesters, 4 sets of drying equipment, and 1 set of fine rice processing line equipment. According to Chairman Wang Haibin, developing processing and distribution was forced by rising production costs and shrinking profit space in the original cooperative, but the “money” prospects were good, and it unexpectedly embraced a “golden doll”.
Shrinking Profit Space “Forces” the Cooperative to Seek New Space
After several years of development, Haibin Agricultural Machinery Cooperative has more than 10,000 mu of land transfer and order-based operation service area, and more than 60,000 mu of socialized service area. In the first few years, the cooperative had good returns from contracted plowing, planting, and harvesting; but in recent years, as the number of production-service agricultural machines has increased year by year and operation service fees have gradually declined, while labor and fuel costs have continued to rise, the cooperative's profit space in cultivation and harvesting services has shrunk rapidly, directly pushing the cooperative to seek new living space. In Chairman Wang Haibin's words: “With agricultural machinery service organizations developing to today, relying solely on socialized cultivation and harvesting services may still work in areas with large plains, large plots, and large machinery such as Northeast China, Shandong, and Henan, but in coastal areas with small plots it is hard to sustain for long. We must extend forward and backward along the entire grain production industrial chain. That is, we cannot just gnaw on the fish head; we also have to eat the fish body and fish tail. In the past, the processing and distribution profits of grain production were often taken away by industrial and commercial enterprises.”
Storage, Drying, and Processing Come Online to Achieve “Half the Kingdom” of Profits
In 2009, the cooperative put a rice processing production line into operation, built a grain reserve warehouse, and launched drying equipment. In the same year, Haibin Agricultural Machinery Cooperative formed “Haibin Grain Crop Professional Cooperative”, which, in addition to transferring land for its own production, also attracted large grain-growing households to join the cooperative for order-based production, providing raw grain for the processing plant. Chairman Wang Haibin introduced that in 2013, agricultural machinery socialized service income was 4.28 million yuan, with a profit of 1.28 million yuan; using warehouse idle time to dry and store grain on behalf of others brought a profit of 300,000 yuan; processing and selling nearly 10,000 tons of rice generated sales income of more than 70 million yuan, with a profit of more than 1.4 million yuan. In Wang Haibin's words: “The cooperative's total profit last year was 2.98 million yuan, and processing and distribution accounted for half the kingdom.”
Quality Determines the Market: Building the Cooperative's Own Brand
Chairman Wang Haibin said with feeling: “For a brand to be recognized by the market, it still has to rely on quality. No matter how loudly the brand is known, if your quality is no good, it still has no vitality.” Haibin Cooperative has transferred more than 4,000 mu of land, mainly to produce high-quality organic rice; signed orders for more than 3,000 mu, mainly to produce high-quality rice; at the same time, it purchases rice paddy from scattered households, mainly to produce ordinary rice; it has registered two brands, “Lihu” and “Manwoxiang”, among which “Lihu” brand soft rice is a mid-to-high-end rice, priced at 15 yuan/jin. Over the past few years, the cooperative's pollution-free rice has built a good reputation in Suzhou, Wuxi, and Ningbo, Zhejiang. If you want to buy rice, go to “Bieqiao” (Bieqiao Town, where the cooperative is located). Today, the cooperative's rice has become the first choice of many local government agencies and schools.
Closely Linked Interests: The Cooperative and Members Form a Community of Shared Destiny
In agricultural machinery and processing and sales, Haibin Cooperative distributes dividends separately for agricultural machinery socialized service income and processing income according to capital contribution ratios (the investment ratio of agricultural machinery and processing equipment at the time of joining the cooperative); for large planting households that join the cooperative, it adopts a guaranteed minimum purchase price policy, that is, purchasing at 1 mao per jin above the state-guided purchase price. Agricultural materials and services used by members are uniformly provided by the cooperative, and after harvest are settled at a 10% discount to the market price at that time. For large planting households with relatively high per-mu yields, a secondary profit distribution is carried out, distributing 2/3 of the cooperative's 2.98 million yuan profit, namely 2 million yuan, according to the quantity and quality of grain delivered. Wang Haibin said: “Under the current operating model, through unified improved seeds, mechanized planting, preferential agricultural materials, and return of processing and sales profits, cooperative members can increase income by more than 200 yuan per mu, and members can completely become wealthy by growing grain.” Now, Haibin Grain Crop Cooperative has grown from the initial few households to 584 households today, and the stable grain source ensures product quality, processing cycle, and stable profits. The cooperative and its members have become a true community of shared interests and a community of shared destiny.