Vegetable farmers now have a protective umbrella against market risks
Green leafy vegetables are an essential dish on the tables of Shanghai residents. Ensuring a stable and balanced supply of locally grown vegetables, mainly green leafy vegetables, is an important part of the practical work done for the people by relevant government departments and insurance companies. Shanghai began exploring cost-and-price insurance for green leafy vegetables (hereinafter referred to as “vegetable price insurance”) in 2006, and it has now been 8 years, yielding some experience. The author recently conducted a special investigation in Shanghai and gained some new understanding.
The origin of Shanghai's cost-and-price insurance for green leafy vegetables
Shanghai residents have a very high affection for green leafy vegetables, especially locally grown and sold bok choy, chicken-feather greens, lettuce, amaranth, Hangzhou bok choy, etc. Shanghai residents have a saying: “Three days without greens, and your eyes sparkle with stars.” Therefore, the government has adopted various means to support the development of the vegetable industry, in line with the requirements of local economic and social development. On the basis of implementing projects such as vegetable field construction and promoting facility management, and in response to the losses suffered by vegetable farmers from natural disasters, Shanghai has actively promoted green leafy vegetable production insurance, which has played a very important role in ensuring vegetable supply. However, after a bumper harvest, vegetables also face the pressure of falling market prices, sometimes dropping below the production costs of vegetable farmers. Unstable income directly affects the enthusiasm of vegetable farmers for growing vegetables, and being able to recover costs during a bumper harvest has become the greatest hope of vegetable farmers. To this end, Shanghai timely launched “vegetable price insurance.”
Shanghai's vegetable price insurance is officially called “Shanghai Green Leafy Vegetable Cost-and-Price Insurance.” It is a form of insurance that, when the market price of green leafy vegetables falls, provides vegetable farmers with partial cost compensation through insurance means. This differs from what is generally understood as price insurance. Price insurance in the general sense is income insurance: if the market price is lower than the target price, the insurance makes up for the lost income. Shanghai's vegetable price insurance, however, after analyzing the decline in market prices, provides vegetable farmers with partial production cost compensation accordingly, ensuring that after a bumper harvest they will not lose production capacity due to extremely large losses caused by low prices. It cannot fully guarantee that vegetable farmers' income levels will not decline. This is also different from vegetable production insurance. Vegetable production insurance is when, in the event of severe natural disasters, the insurance company provides vegetable farmers with certain insurance compensation based on the degree of post-disaster loss in vegetable production; it has nothing to do with market price fluctuations. Vegetable production insurance and vegetable price insurance complement each other and are both important components of vegetable insurance.
Shanghai's practices in carrying out vegetable price insurance
(1) Government support and guidance
The Shanghai Municipal Agricultural Commission has continuously increased investment in infrastructure and supporting facilities for vegetable production, promoting the relative stability of vegetable production area. In order to better respond to vegetable market risks, Shanghai studied and formulated a “vegetable price cost insurance system” and specially established a work promotion group for ensuring off-season green leafy vegetables, composed of units including the Municipal Agricultural Commission, Municipal Finance Bureau, Municipal Statistics Bureau, Municipal Vegetable and Edible Fungi Industry Association, and Anxin Agricultural Insurance. Each district and county also established local work promotion groups according to the city's organizational model and in reference to municipal-level work requirements, seeking support from finance, policy coordination, and information departments, doing a good job in innovation-driven development, strengthening work coordination and linkage, and advancing the further implementation of vegetable price insurance work, laying the foundation for achieving stable production, stable supply, and stable prices.
(2) Insurance company operation
Anxin Agricultural Insurance Company was established in 2004. It is China's first professional agricultural insurance company and the only company in Shanghai operating agricultural insurance business. Green leafy vegetable price insurance also began pilot testing at Anxin Agricultural Insurance in 2006. In the process of advancement, it has continuously summarized and improved. From underwriting to claims settlement, all links are open and transparent, adhering to the “four ones” principle of “one variety, one household, one period (one marketing period), one policy,” strictly underwriting according to crop rotation, achieving “underwriting upon seeing the vegetables,” and district and county agricultural commissions also conduct sample verification of underwriting information. Claims are processed automatically according to the price data system, and loss situations are promptly notified to branch companies in each district and county. Branch companies verify the marketing situation of green leafy vegetables, open a green channel for priority processing of claims for farmers who have already marketed their vegetables and suffered losses, and deliver compensation payments to farmers' hands as quickly as possible.
(3) Selection of important seasons
Shanghai selected the two seasons of “winter off-season” and “summer off-season” as the time periods for vegetable price insurance. “Winter off-season” refers to December 15 of the current year to March 15 of the following year, and “summer off-season” refers to June 25 to September 25 each year. These two seasons coincide with the off-season for vegetable production, with frequent natural disasters and severe pests and diseases. Vegetable price insurance has played a very important role in promoting vegetable farmers' production and ensuring Shanghai residents' vegetable supply during off-seasons. Data from Anxin Agricultural Insurance Company show that in the 2012 “winter off-season,” the insured area was 75,000 mu-times, the affected area was 49,000 mu-times, the compensation amount was 4.98 million yuan, involving more than 1,500 farmer households and more than 470 cooperative-times. In the 2013 “summer off-season” insurance, the insured area was 126,700 mu-times, the affected area was 87,000 mu-times, the compensation amount was 6.2346 million yuan, involving more than 2,680 farmer households and more than 800 cooperative-times.
Main experiences of Shanghai in carrying out vegetable price insurance
(1) Participation of cooperative organizations is key
Because Shanghai carried out agricultural insurance business relatively early, vegetable specialized cooperatives and leading vegetable enterprises with relatively high levels of specialization and organization all participated in vegetable price insurance. The premium rate for vegetable price insurance is 10%. In order to encourage scattered vegetable growers to also participate in insurance and improve the level of organization and specialization in vegetable production, Anxin Agricultural Insurance encourages scattered households to join together. For cooperatives, leading enterprises, and horticultural farms, a preferential rate is implemented, with a 20% discount on the basis of the standard rate, which has driven a large number of scattered farmers to join cooperatives. During the investigation, it was found that in Qingpu District, many vegetable farmers voluntarily established vegetable planting cooperatives to obtain relevant support policies.
(2) Price data collection is the foundation
The important basis for triggering claims in vegetable price insurance is the market price. Therefore, the collection of price data is the foundation. According to the requirements for vegetable price insurance compensation, the current market price is compared with the average price at the same price collection point in the previous three years. It can thus be seen that the collection of historical data and the selection of market price collection points are very important. In addition, costs such as agricultural materials and labor are rising year by year, and factors such as CPI increases are all issues that vegetable price insurance needs to consider.
(3) Government department support is the guarantee
Government support is indispensable in the development of agricultural insurance, and even more indispensable in vegetable price insurance. Shanghai's off-season green leafy vegetable insurance is the type with the highest premium subsidy among all agricultural insurance in the city. The municipal-level fiscal premium subsidy proportion reaches 50%, each district and county can provide matching subsidies according to their finances, and the proportion of premiums paid by farmers themselves is not less than 10%. Because balancing is needed across the whole city, Shanghai's agricultural authorities, according to resource conditions, achieve the “three balances” of balanced sowing, balanced production, and balanced marketing. For areas exceeding the planned area, in principle the municipal-level fiscal authority will not provide premium subsidies, ensuring that farmers produce according to plan. This is an important guarantee for the success of the “off-season guarantee” work.
Shanghai's vegetable price insurance has taken an important step in insurance against market risks and accumulated valuable experience. How to apply this market insurance tool to other agricultural products and other regions still requires in-depth study.