Contract farming cannot do without credit reporting as its protective talisman

Core reading

From garlic and ginger in previous years to maca and pineapple this year, farmers have been badly hurt amid falling agricultural product prices. Contract farming, as an important means of producing according to sales, plays a certain role in stabilizing agricultural product prices, ensuring farmers' reasonable returns and withstanding market price risks. However, a reporter's investigation found that in actual operation, contract farming has become difficult to promote because some farmers have poor awareness of contracts and deliberately default, which in turn harms both merchants and farmers.

Agricultural product prices soar - planting scale expands - supply exceeds demand - prices plummet. This rollercoaster of prices has undoubtedly made more and more farmers involved in cash crop cultivation nervous. This year's Yunnan maca went through a process of falling from 120 yuan per jin at its peak to 1 yuan. Local governments once tried to solve the problem of price fluctuations through contract farming, but the situation exceeded the expectations of the government and merchants...

When prices rise, the contract becomes a mere scrap of paper

"If someone else offers one or two yuan more, most farmers will no longer honor their promise and will instead sell to other traders." A staff member promoting Chinese bee breeding in remote mountainous areas of Yunnan told reporters that although farmers in remote mountainous areas are simple and honest, they often lack the spirit of contract. "If you cannot 'hold' farmers through technology or follow-up policy subsidies, it is very difficult to make farmers keep their word with just a piece of agreement!" the staff member said.

The reporter learned that in many places in Yunnan Province, local governments once actively promoted contract farming and guided farmers to sign sales agreements with companies before planting maca, thereby avoiding the risk of market price fluctuations. But just a few years ago, farmers who had signed agreements did not sell their maca to the merchants, and they lightly described their breach of contract as "human nature."

During the period of rising prices, farmers were unwilling to sign contracts with companies. In a certain maca-producing area in Yunnan, some companies encountered farmers refusing to sign before they had even signed purchase agreements with villagers. If an agreement was reached with a maca company, villagers could not only obtain seedlings for free, but also receive corresponding compensation, with income of nearly 10,000 yuan per mu according to the agreed purchase price. But some villagers still believed that at harvest time the maca market "might be better" and were unwilling to sell cheaply. Unexpectedly, at this year's harvest stage, what awaited them was a sharp price drop, and the farmers were left with no tears to cry.

In Bajie Subdistrict, Anning City, Yunnan Province, edible roses also experienced a price rollercoaster last year, with rose prices at their lowest falling to two or three yuan, not even enough to cover the labor cost of harvesting. A company once tried to place orders with farmers in advance, but the piece of agreement produced no benefit. "During peak season, our company needs to purchase seven or eight tons of roses every day, but some small traders, because their purchase volume is small, buy at a slightly higher price. When other farmers hear about this, they start arguing with us." Dai Xiaobang, a staff member of Anning Runsen Agricultural Technology Co., Ltd., spoke with considerable helplessness when talking about rose purchases.

In fact, farmers who do not honor contracts also have their own calculations. "Selling to anyone is still selling; if the price is a bit higher, the income is a bit more. Besides, the person buying the flowers is an acquaintance, so it's hard to refuse." Villager Li Shi (pseudonym) told reporters. As for the breach-of-contract clauses stated in the contract, Li Shi did not seem to care. "They are a big company, they don't lack this little bit of my flowers, and they won't haggle with me over this." Regarding this mindset, Dai Xiaobang was very helpless: "There will be such people in every village. They think breach of contract is no big deal. Even if they are kicked out of the cooperative, they will plead with village officials. We are all from the same village, so in the end it all comes to nothing."

A rose processor told reporters that to solve the problem of sharp price drops in agricultural products hurting farmers, contract farming is effective, and the capital advantages of large companies help resist the risk of market price fluctuations. "But as far as the current situation of farmers honoring contracts is concerned, whichever company signs purchase and sales contracts is the one that suffers."

A contract that was originally meant to benefit both sides has become a shackle that only restricts the company.

Merchants defend their rights: they win the lawsuit but cannot enforce their rights

If farmers do not honor contracts, can companies defend their rights? It is by no means easy.

Although the overall loss is relatively high, when the loss falls on relatively scattered farming households, each household's output and output value are not high. It is costly for companies to collect from household after household, and if they resort to the courts, the lawsuit is easy to win but enforcement is extremely difficult. "If enforcement is really carried out, once farmers unite to resist and it turns into a mass incident, the government often can only adopt a pacifying attitude." Liu Zhiwei, director of the Industry Office of Bajie Subdistrict, said.

And when prices plummet, companies still have to purchase at the contract price. A very small number of farmers even refused to sell to companies when prices were high in previous years, but demanded that companies execute the contract when prices plummeted. After several years, many companies are also unwilling to purchase agricultural products through contracts, and contract farming is difficult to sustain in many places.

"Farmers often decide their planting scale based on the previous year's purchase price, but the market often lags, and farmers' ability to withstand risk is relatively poor." Liu Zhiwei said that the prominent problem at present is that supply and demand information in the agricultural product market is not disclosed in a timely manner, which is an important reason for large fluctuations in agricultural product prices.

Faced with drastic fluctuations in agricultural product prices, the government faces a dilemma: on the one hand, the government has no right and does not dare to require farmers to plant more or less of a certain crop; on the other hand, if the government does nothing at all, once agricultural products are unsalable, the resulting drop in farmers' income cannot be ignored, especially since once serious damage is caused to an industry in a certain place, it often also affects social stability in a small area.

Liu Zhixiong, associate professor at the Business School of China University of Political Science and Law, told reporters that it is still relatively common in reality for contract farming to encounter farmer default. "Once farmers default, companies are often in a weak position." Liu Zhixiong believes that under current circumstances, farmers' awareness of contracts is relatively poor, and the cost of forcing farmers to honor contracts is very high, with relatively high social risks as well. At present, there are still no effective measures to solve this problem.

Filling the shortfall in integrity is a long and arduous task

In fact, precisely because they have seen the potential risks of contract farming, many grassroots governments have begun to guide companies to adopt protective pricing to stabilize the market.

The reporter learned that entering July, rose prices in Anning Bajie once again fell to 3 yuan, and even at such a low price, many farmers still could not sell their flowers.

However, because they signed protective-price agreements with Runsen Company, many farming households are not worried about sales. Dai Xiaobang told reporters: "We signed contracts with farmers and coordinated a protective price. This year we signed for more than 200 mu. When the market price is low, we purchase at 5 yuan per kilogram; if the market price is higher than the protective price, we follow the market."

Why 5 yuan? Dai Xiaobang did the math for reporters. In a sluggish market, after deducting farmers' costs and labor, a protective price of 5 yuan can ensure that farming households can still have a net income of 2,600 to 2,700 yuan per mu of roses per year, which is better than growing rice. If it were lower than 5 yuan, flower growers would simply dig up the flowers.

However, the scope of the protective price signed between Runsen Company and farmers is not large, and the two sides have already cooperated for many years, so there is a certain relationship of trust. How can contract farming be developed on a large scale? Opinions from all sides are relatively unified: the key is to do a good job in rural credit reporting.

"Many farmers are older. They neither need to take out bank loans nor often go out to work. After problems arise in credit reporting, methods such as loan and ticket purchase restrictions are all difficult to turn into effective constraints." Liu Zhiwei believes that at least in the short term, the rural credit reporting system will not be easy to operate effectively very quickly. Liu Zhixiong believes that the concept of credit reporting cannot be achieved overnight, and sustained and extensive publicity is especially important. "It is suggested that companies learn more about farming households before signing contracts, and consider signing orders only after gradually establishing relatively stable supply relationships with some farming households, thereby forming a community of shared interests of company + farmers." Liu Zhixiong said.