Cooperatives can only go far by strengthening their foundations
The three elements of "money, land and people" are to agricultural cooperatives what sunlight, air and water are to humans. How well a cooperative fares and whether it can develop sustainably depend entirely on whether these elements can support it. Recently, reporters traveled to Fengqiu County in Xinxiang City and Shenqiu County in Zhoukou City, Henan Province, for interviews and found that cooperatives face multiple difficulties such as being unable to obtain loans, slow structural adjustment and high costs. Although county-level governments have increased support, for cooperatives to "strengthen their physique," grow and play a role in leading people to prosperity, they need not only more policy innovation but also the rapid improvement of their own development mechanisms.
Supplementing funds --
Raspberries are delicate and need cold storage, honeysuckle harvesting requires working capital, and some cooperatives have not borrowed a single cent in 6 years
The Qingdui Raspberry Cooperative, where Wang Shuqin works, is one of the best cooperatives in Fengqiu County -- crowned as a "national-level demonstration cooperative," with more than 10 million yuan in assets, annual operating income of more than 20 million yuan, and driving more than 6,000 farming households inside and outside the province, yet they still lack money.
Originally, the cooperative did not lack money. Every year during the raspberry harvest, working capital needs exceed 50 million yuan. Through company mortgages and joint guarantees by members, Wang Shuqin could always borrow more than 10 million yuan. If buying and selling went smoothly, turnover was not a problem. But last year, the cooperative began building a cold storage facility with a capacity of 6,000 tons, investing 26 million yuan, including a bank loan of 20 million yuan. This year, the bank withdrew 15 million yuan in loans all at once, and funds suddenly became tight. After harvesting raspberries, they could not pay the farmers. "The IOUs that had not existed for years reappeared."
Wang Shuqin had not wanted to build cold storage, but raspberries are "delicate": picked in the morning, they rot within a day without freezing. Previously, they rented 6 cold storage facilities in Xinxiang. From picking to transport to unloading, sending them there and hauling them back added 600 yuan in costs per ton, costing more than 1 million yuan extra over a year. "To solve the problem once and for all, we had to build our own cold storage." Wang Shuqin steeled himself, discussed it with the members, and launched the project.
The troubles of lacking money followed. This year, banks no longer allow joint guarantees by farming households; only land certificates and property certificates can be used as collateral, otherwise no loan is possible. The cooperative rents land from farmers, so how could it have land certificates? Earlier, Wang Shuqin established a company to guarantee loans for the cooperative. Now company guarantees are also rejected.
"The cooperative has been established for 6 years and has never borrowed a single cent from a bank," said Zhu Changchun, chairman of the Xinfeng Agricultural Planting Professional Cooperative in Fengqiu County. He grows honeysuckle. Because of a lack of funds, when the picking season arrives, he too has no choice but to issue IOUs to farmers, settling accounts while selling goods.
The situation in Shenqiu County is similar to that in Fengqiu County. The Linjiafu Cooperative was founded using a "land shareholding" model and now has 1,986 members. In 2011, when the cooperative was first established, members proposed that 800 yuan per mu in rent had to be paid first, otherwise the land could not be leveled. The cooperative had no assets for collateral, so chairman Lin Feng had to raise more than 1 million yuan himself to advance the rent. "If I had not raised the money, the cooperative would have had a hard time opening," he said.
Although loans are difficult, expenses are no less at all. Take electricity, for example. The electricity fees paid by Fengqiu cooperatives differ by time period: from 0:00 to 7:00 a.m., 0.5 yuan per kWh; from 8:00 to 12:00, 1 yuan per kWh; from 12:00 to 18:00, 1.5 yuan per kWh; from 18:00 to 0:00, 1.75 yuan per kWh. To save expenses, the raspberries picked by the Qingdui Cooperative are frozen as much as possible at 0:00. But raspberries left for half a day have a lower whole-fruit rate, and each ton for export earns 6,500 yuan less. "We just hope the agricultural electricity price of 0.4 yuan per kWh can be applied," Wang Shuqin said.
Wang Junyi, deputy director of the Fengqiu County Party Committee Agricultural Office, said the county allocates 1 million yuan in special funds each year to support cooperatives through interest subsidies and rewards in place of subsidies. It establishes a credit rating and loan system for farmers' cooperatives and, according to their credit ratings, opens a green channel for agricultural loans. Cooperatives are encouraged, under the principles of not lending externally, absorbing shares but not deposits, and distributing dividends but not interest, to steadily carry out pilot internal credit cooperation.
"Fundamentally speaking, to solve the loan difficulties of cooperatives, we must rely on financial innovation and introduce targeted financial policies," banking professionals suggested. The government can provide part of the risk compensation fund to leverage several times the amount in bank loans, with insurance companies stepping in to jointly support cooperatives, forming a "government + bank + insurance company" financial support model. At the same time, cooperatives must also value compliant operations and actively introduce standardized modern financial management methods to meet banks' credit qualification requirements.
Transforming methods --
Those growing corn switch to soybeans, those transferring land switch to trusteeship, and processing extends from flour to steamed buns and mantou
Structural adjustment is currently the biggest headache for grain-planting cooperatives.
Over the past 5 years, the Shenqiu Linjiafu Cooperative has mainly grown grain. Last year, wheat yield was 565 kg per mu, 64.1 kg higher than the county average per mu, increasing total income by 572,000 yuan. Corn yield was 538.5 kg per mu, 38 kg higher than the county average corn yield per mu, increasing total income by 319,000 yuan. "Grain market prices are low, and the costs of harvesting and planting, irrigating fields and land rent are high. In years with favorable weather there is a slight profit, but once natural disaster strikes, losses are certain," Lin Feng said. The Linjiafu Cooperative switched entirely to growing soybeans this year. At present, the soybeans are growing well.
Yue Guihe is chairman of the Yongye Land Transfer Professional Cooperative in Fengqiu County. So far he still has not decided what to grow instead of grain, and has had no choice but to return 400 mu of transferred land.
In 2013, Yue Guihe and 5 others established the cooperative, transferred more than 1,600 mu of land, and planted wheat and corn. The transfer fee is 1,200 yuan per mu, and adding labor, seeds, fertilizer and electricity fees, the annual cost is 2,300 yuan per mu. With two seasons a year, wheat and corn together can sell for only a bit more than 2,000 yuan per mu, meaning a loss of more than 200 yuan.
"Growing grain loses money, but it is familiar and reassuring; with cash crops I fear there will be no market," Yue Guihe said. "I hope the comprehensive agricultural subsidy policy is put in place as soon as possible. Now, farmers receive subsidies whether or not they grow grain, while cooperatives cannot get subsidies, which is not conducive to increasing enthusiasm for growing grain."
The Qingengtian Cooperative in Fengqiu also grows grain. Last year, the selling price of corn fell from more than 1 yuan per jin to 0.72 yuan, causing a deficit. To reduce costs, their land management model shifted from transfer back to trusteeship.
"Trusteeship includes full trusteeship and partial trusteeship, totaling 12,000 mu. Full trusteeship charges 960 yuan per mu, but costs such as irrigation and drying are high, so it is not worthwhile. This year, all 4,000 mu under full trusteeship was returned to farmers, leaving only partially entrusted land," said chairman Cao Xianzhao. The cooperative set aside 1,000 mu to trial growing "Jili fruit," and intercropped potatoes, peanuts, sweet potatoes and watermelons across two seasons. Once it enters the fruiting period, the average income per mu can reach 30,000 yuan.
The government is also actively guiding structural adjustment. The Fengqiu County government issued opinions that, starting in 2016, for raspberries and honeysuckle grown in contiguous plots of more than 100 mu, 1,000 yuan per mu will be subsidized, irrigation, electricity and other infrastructure will be given priority support, and cold storage and honeysuckle drying facilities will be given priority subsidies. The government allocated 10 million yuan to establish a development support fund for the raspberry and honeysuckle industries, providing support to the upper, middle and lower reaches of the industries. It supports cooperatives in carrying out primary processing and deep processing of agricultural products, promoting integrated operations across production, processing and sales, and trade, industry and agriculture.
Cao Xianzhao newly established a stone-mill flour factory, and the products have already entered the market. "Flour profits are thin, so process it one step further into steamed buns and mantou and supply them directly to supermarkets and restaurants."
Strengthening talent --
Peak labor demand is 5,000 people, but only 400 can be found; some farmers do not know how to operate farm machinery and are unwilling to learn
Every spring, when the honeysuckle picking season arrives, Zhu Changchun is both delighted and troubled. What delights him is the imminent harvest; what troubles him is the lack of manpower.
"Honeysuckle picking relies entirely on manual labor. If picked in time, the medicinal properties and quality are good; if not, the efficacy is greatly reduced," Zhu Changchun said. The Xinfeng Cooperative has 2,000 mu of honeysuckle, and at peak flowering it needs 5,000 people for picking. However, actual employment is at most 400 people, and the labor shortage is severe. For this reason, they are developing mechanized picking equipment to make up for the labor gap.
"Once raspberries are picked, they must be sorted and refrigerated immediately. But those who do the work are all the elderly and women. With so few hands, we can only freeze them first and then find people to slowly sort them in the cold storage," Wang Shuqin said. The cooperative employs more than 50 people year-round, with average wages of 60-80 yuan per day at room temperature. If they work in the cold storage, wages double. This alone increases annual spending by 2 million yuan.
Lin Feng said cooperatives not only lack manpower, but even more lack new-type farmers who know how to farm. The Linjiafu Cooperative employs 26 farmers, all in their 50s. Although they are rich in planting experience, having long engaged in household management, their ability to learn mechanized farming is poor. The cooperative bought a batch of farm machinery; they do not know how to use it and are unwilling to learn. Every planting and harvesting season, the cooperative still has to hire people to operate it, adding extra costs.
"Without professionals, whenever we hit a technical bottleneck we are always scratching our heads," said Shan Junjie, chairman of the Junmin Lotus Root Planting Cooperative in Shenqiu County. Especially when pests and diseases strike, by the time experts arrive, the best time for diagnosis and treatment has already passed. He hopes the government will regularly organize expert lectures and establish smooth contacts with experts to reduce planting risks.
A relevant official in Shenqiu County said the county government actively seeks provincial fiscal project funds and support funds for cooperatives and provides support in base project construction, technical training, and applications for pollution-free and green products.
Reporters found during interviews that because of high financing, land and labor costs, cooperatives face multiple difficulties, and some members have withdrawn. For example, in the Qingdui Cooperative, a village group once joined as a whole, with 78 farming households, and currently 30 households have withdrawn. The Xinfeng Cooperative once had more than 1,300 member households at its peak, but because honeysuckle prices fell for 6 consecutive years, only a bit more than 300 households remain. "To raise members' awareness of sharing risks, the key is to find a way out," Zhu Changchun said. They joined hands with universities and spent 160,000 yuan to develop 2 new honeysuckle varieties. As new products come onto the market, members' confidence will gradually recover.