Step into the pineapple free-growing demonstration zone and explore a pineapple planting site
On the risks of agricultural contract farming, legal protection and the tentacles of neoliberalism in the Watcher report
1. Apart from processing, native pineapple has no other outlet, so farmers should manage the risks themselves?
The report mentions: "This year the climate has been abnormally hot, and native pineapples across Taiwan have been forced to ripen early, so all contract farmers are rushing to harvest." In reality, during production, farmers' main sources of information on climate conditions are still the farmers' associations and the reports of the Central Weather Bureau. However, the mechanisms and prevention of frost and heat damage, rainfall expectations and agricultural meteorological forecasts have in fact long been studied in Taiwan; yet how farmers on the production side obtain such long-range forecast information and prompts for response measures perhaps still leaves room for improvement on the information transmission platforms.
Agricultural production was originally self-produced and self-sold or conducted through regional exchange, and could carry out preliminary hedging and subsistence through mutual aid between regions, borrowing grain, and storage. When native pineapple production was brought into contractual farming transactions, it became a labor pattern without a fixed employer; and when the contract buyer ultimately buys all the labor process of the contract farmer at the quantity and price of qualified native pineapples, what appears to be a pure labor payment relationship actually also implies the logic that the contract farmer must manage the internal and external risks of the agricultural product on their own.
However, the so-called notion that farmers should manage climate and production risks themselves should only qualify as risk-sharing between both parties when the transaction takes place on the basis of transparent information and when both parties can mutually grasp the external effects on production conditions, that is, farmers should manage "part" of the risk themselves, not all of it. So who should be responsible for the "information transmission" of "agricultural meteorology and forecasting" and "crop production management response"? Farmers? Enterprises? Or the competent authorities? Or should both parties to the transaction and the government all have the responsibility to manage the risks they each encounter according to their own functions and roles? Therefore, only after this basic problem of information transparency is resolved is there any qualification to talk about marketization; to try to use a corporatized approach to "have commerce lead agriculture."
2. Improving the fairness of native pineapple contract farming agreements
"Xu Mingren says bluntly that making the contract fairer is a small matter"
The black and white terms of the contract are the deciding factor of this non-fixed labor-employer relationship; since we are discussing the fairness of native pineapple contract farming agreements, I think it is necessary to view the fairness of agricultural contract farming in general through the lens of competition law. As an aside: taking the contract-farmed rice my father eats as an example, I once visited the farm owner and he calculated his business arithmetic for me: the rice is grown by natural farming methods, and the yield per unit area is one-half to one-third of ordinary rice. He takes on rice contract farming through friends and environment- and ecology-related connections, supplying with a guarantee of 90 percent of the rice volume. That is, 200 yuan of rice can buy a large bag at the supermarket, but his rice can only buy about one liter in volume. But it is especially delicious. He does not need to go through enterprise purchasing with unclear or unfair contractual rules; instead he takes on many friends as "grain shareholders" production risks are shared by both parties, and he clearly states the guaranteed volume and quality. But pineapple is not like that. Native pineapple needs processing, and can only be processed; agricultural products that need processing must go through processing plants, so for pineapple or processed garden products, the form of the sales contract, the buyout, and the property rights of the pineapple after processing are the key points here; pineapple property rights are the intermediary that affects how much both parties pay in the transaction.
"Bagging is to protect the pineapple fruit, meeting SunnyHills' requirement of 'no pesticide spraying'... One bag costs NT$0.45... Outsiders think SunnyHills buys native pineapple at NT$11 per Taiwan catty, but farmers must pay the shipping company NT$1 per Taiwan catty in freight, and pay the farmers' association and cooperative NT$0.5 per Taiwan catty in handling fees, which amounts to farmers only getting a purchase price of NT$9.5 per Taiwan catty."
The first question is why do farming friends have to pay for the bags? For transport? Why these costs unrelated to labor? The cause of this phenomenon is the unequal supply flexibility between the two parties; encouraged by the Council of Agriculture, quite a few farming friends have joined the ranks of contract farmers. As long as the contract buyer faces a large enough quantity of contracted native pineapple supply, the supply side (contract farmers) has many choices, and many people come to buy the contract buyer's processed products, the greater the flexibility for the contract buyer, and the more room there is to maneuver around the conditions for paying these surplus production costs. Also, the durability of native pineapple is actually not high, because using refrigerated trucks back and forth in transport does not match the cost and the quality keeps declining; after being returned and continuing to ripen, there is simply no way to ship it out again, which places a considerable limit on the supply flexibility of native pineapple. The reality is that the party with less flexibility must absorb more of the supply costs, or absorb them all, yet the "small farmer-processor" production contract farming was originally a product encouraged by the Council of Agriculture, and the Council of Agriculture has the responsibility to resolve the problem of fairness in contract farming; even if it were not encouraged by the Council of Agriculture, the Agriculture and Food Agency, as the competent authority for agricultural and food production, should also intervene in the general fairness problem of ordinary agricultural contract farming agreements.
"This year, over-ripeness alone, due to discrepancies in shipping times and unclear visual inspection standards, has caused constant disputes between contract farmers and SunnyHills. Next year, how will 'under-ripe' and 'more than 2 days after harvest' be determined? The appearance, head and tail, must not exceed 0.5 cm - is it measured one by one, spot-checked, or judged by eye? If it still relies on visual inspection as the return standard, how can disputes be avoided from breaking out again?
SunnyHills, citing 'excessive supply,' asked to reduce next (2015) year's contracted pineapple supply by one-third; for individual farming friends, Mr. A was even told to reduce his purchase volume by one-half to two-thirds.... These anti-abuse mechanisms are not written into the contract, nor has any manufacturer, farmers' association, cooperative, or the Council of Agriculture been seen convening farmers and experts and scholars to discuss them together."
If a supplier, based on its own supply chain management considerations, reduces or cuts off the volume for individual farming friends or a large group of farming friends. For those who do not investigate the approximate maturity and quality of the batch of goods, and simply return the entire batch; if it is truly a malicious return, affecting the signing of a continuing contract, there is actually a suspicion of abusing the counterparty advantage in the transaction; for such conduct under the Fair Trade Act, it violates Article 24's deceptive or obviously unfair acts. This, in enterprise-led agricultural contract farming generally, will be a fairly common problem. And the following passage in the report about post-harvest handling actually offers a great insight.
"Reviewing next year's contract, it is clearly stricter than this year's. For example, regarding the specification norms in Article 3 of the contract, this year's second item reads 'excluding damaged fruit (including flower camphor disease, wilt disease, black heart disease, black rot disease, black eye disease, red disease... etc.), unripe fruit, and fruit that is too small (below 1.5 Taiwan catties),' while next year's second item is expanded to 'excluding damaged fruit (including flower camphor disease, black heart disease, black eye disease, over-ripe, under-ripe, bruising, cracked fruit, more than 2 days after harvest... etc.), with the appearance, head and tail, not exceeding 0.5 cm, and fruit that is too small (below 1.5 Taiwan catties).'
As for the post-harvest handling part, it is actually something that can be solved by a fairly standardized operating procedure; but the problem is that such standardization actually has a fairly high capital threshold; the post-harvest arrangement affects post-harvest diseases and ventilation, or whether there is space after harvest to cool down rapidly and, during transport, to prevent respiratory heat and exposure to light from lowering post-harvest quality, and so on. Who should bear this part of the production cost - such investment actually brings a very direct and significant improvement to the supply yield and quality. Both the farmers' association and the contract buyer can in fact jointly afford such equipment investment, ensuring the stability of supply quality. As for the integrated disease management part, I do not understand it very well; that is a specialty requiring considerable knowledge background; I hope someone enthusiastic will reply and share.
In my view, special regulations or principles governing bilateral contract farming are also necessary; to directly protect the rights and interests of both farmers and contract buyers, including the principles of responsibility, good faith and compensation arising from production, payment, returns and so on, should incorporate the industrial characteristics of supply flexibility, crop production and post-harvest handling, to formulate measures consistent with the characteristics of agricultural production contracts; this is not an infringement on the autonomy of private law, but a matter of protecting competition and clearly defining the fairness of transactions.
3."The free economic pilot zone and native pineapple are two different things." Really?
In recent years, the Council of Agriculture has vigorously promoted and encouraged "corporate contract farming" this in fact shifts the local transactions of agricultural production to a supply and trading market without a fixed employer. Through specialized division of labor, native pineapple production has been brought into a link of agricultural corporatization; becoming a link in the production system that can be cost-down, substituted, eliminated, labor-quota'd, capital-compressed, yield-considered, and industrialized in process. Contract farming is an inevitable trading phenomenon in agricultural production, but the method must be able to ensure the rights and interests of both parties. In terms of the disclosure of production risks above, the protection of transaction fairness, and the norms for disease and post-harvest handling, these are considerable challenges visible in the report. And the establishment of the free economic pilot zone is precisely a deepening and expansion of this seemingly pure labor (but in reality squeezing the party with less flexibility) trading system: the "small farmer-processor" commerce-leading-agriculture contract farming model, and this model, once it enters the free economic pilot zone where the influence of capital becomes an intermediary that manifests itself, will, because of the mass-production effect from industrialization, deepen this system further in two aspects - more farmers joining the supply side of production contract farming, and less flexibility causing farmers to bear more production costs. On this part alone, the discussion focuses on how to improve such a trading system.
So the free economic pilot zone and native pineapple are of course the same thing. This passage from Watcher is also the greatest dilemma that the entire free economic pilot zone will deepen for contract farming if it uses Taiwan's agricultural raw materials for agricultural value-added upgrading (or if Taiwan does not open a free economic pilot zone, this is, after all, an existing problem):
"In the weaker position within the contractual relationship, whether the farmers' association or the farmers, after 'contract farming' becomes a market that all parties' resources eagerly rush into, can only give up more of their own rights and interests in exchange for the manufacturer's willingness to continue cooperating. What was originally a well-intentioned contract farming mechanism has now fallen into an unbalanced and chaotic state. Although the farmers' association bears the responsibility of matchmaking, it cannot check the manufacturer; only if the Council of Agriculture intervenes with a more proactive attitude to help the manufacturer, farmers' association, and farmers establish a sound contract farming mechanism can the problem truly be resolved."
Conclusion
Agricultural production industries and agriculture's supporting industries have introduced the forms of modern social enterprise management and production-marketing transactions, forming a clearly divided agricultural production pattern and the transmission process of its product flows - this is the structural form of today's agricultural corporatization. After division of labor, contractual behavior is inevitable, and within it the concepts of crop price (and flexibility) and contract farming norms are like the relationship between the setting of labor wages and the promotion of labor conditions. Here the contractual details of crop production involve the fact that agricultural production itself has high external risks, climate, pests and diseases, cultivation guidance and harvest management that need to be solved jointly, and the norms of agricultural production contracts determine whether things are fair or not. For the farmers on the front line of cultivation, price is the most important; and contractual norms dictate price. Under the thinking of pursuing industrialization, low gross margins and mass production in the free economic pilot zone; in the future, farmers drawn in by agricultural value-added policies, no matter what crop they grow, will certainly suffer even more; moreover, enterprises may switch to using agricultural products from other countries, and there will be no need to even contract with domestic farmers' associations.
This process is one of the few ways Taiwan's agriculture is expected to find a way to survive under the wave of trade liberalization; whether it is really so remains to be seen; but those in power must never forget the inspiration given by Old Mao across the strait; the reason low income and enclosure succeeded in organizing a peasant revolution is that today's corporate contract farming is like enclosure; through transactions, money capital has penetrated individual contract farmers to control their livelihoods. From this it appears that, actually, the contract farming of native pineapple and the pineapple cake manufacturer may not be a problem of tangled or hard-to-resolve interests, but that we have neglected how, as Taiwan faces past and future trade liberalization, the neoliberal transaction form has been internalized into the agricultural production chain under "commerce leading agriculture" the key problem should be that food and capital are already firmly bound together, but what choices do we have? What else must we sacrifice? Or will we act as if nothing is wrong? I may go buy a box of pineapple cakes produced in the free economic demonstration zone and give it to someone dear; but don't forget! By then the country-of-origin labeling will already have been lifted!