NINGXIA: FARMERS GETTING INCOME BOOST FROM CASH CROPS AND

UNCLAS SECTION 01 OF 02 BEIJING 005601 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON EAGR PGOV SOCI CH SUBJECT: NINGXIA: FARMERS GETTING INCOME BOOST FROM CASH CROPS AND NON-FARM WORK BUT FACE CONSTRAINTS SUMMARY -------------- ¶1. (SBU) Farmers in Ningxia Hui Autonomous Region's Zhongning County have enjoyed a significant income boost in recent years as a result of both expanding opportunities for non-farm work and Zhongning's production of wolfberries, a cash crop which is earning historically high prices in the international market due to increasing demand. Local officials are pleased with the pace of economic development in the county, and they acknowledge the important role played by both rural cooperatives and local companies. Local officials and businessmen state, however, that Ningxia's farmers remain concerned about a lack of available arable land, an inadequate water supply, and insufficient financing. END SUMMARY. TRAVEL TO NINGXIA -------------- ¶2. (SBU) Econoff and Conoff traveled to Ningxia Hui Autonomous Region August 15-18. Emboffs participated in the Second Ningxia International Halal Food and Muslim Commodities Festival and the Investment and Trade Fair in Yinchuan, the provincial capital, on August 15-16. Emboffs traveled to the countryside in Zhongning County on August 18. NON-FARM WORK AND CASH CROPS TO BOOST INCOMES -------------- ¶3. (SBU) According to officers at the Wolfberry Bureau in Zhongning, Ningxia Hui Autonomous Region accounts for more than 40 percent of China's wolfberry production, and the industry has benefited from increasing prices in the international market due to demand in health stores in Europe, Japan, and the United States for the dried fruit, which is purported to have antioxidant properties. ¶4. (SBU) Zhongning's wolfberry farmers earn higher incomes than many of their counterparts in poor provinces. Despite the fact that Ningxia is one of China's 10 poorest provinces -- with an economic structure similar to Sichuan, Gansu, Guizhou, and Jiangxi -- farmers in Zhongning County manage to earn approximately RMB 3000 (USD 400) per year with half of that amount derived from wolfberries and the other half from grain production and part-time work. ACHIEVING ECONOMIES OF SCALE WITH SMALL PLOTS -------------- ¶5. (SBU) In the case of wolfberries, Zhongning County officials said they use two methods to bundle together small plots into large farms in order to achieve economies of scale and share costs of water, fertilizer, and seeds. One method is to help farmers organize cooperatives or sales associations to share costs and market their products. In general, each farmer has only one mu to farm (although Emboffs spoke to one farmer who operates four mu). The cooperatives then sell their products to companies (longtou qiye) in the county who promise to pay farmers a competitive rate for the wolfberries, which are then processed, dried, and exported. ¶6. (SBU) Companies also use a more direct method, sometimes purchasing farmers' land-use rights for RMB 500 per year and then paying the farmers or contract workers a salary for farming the land. (Note: Wolfberry production is very labor-intensive requiring work throughout the spring, summer, and fall for planting, care, and harvesting. End Note.) The company is then responsible for irrigating the land and purchasing inputs. Farmers are free to either work for the company or seek work elsewhere in the city or countryside. STILL FACING SIGNIFICANT CONSTRAINTS -------------- ¶7. (SBU) Local officials and businessmen said they are concerned about constraints facing farmers that will limit growth in the future. The primary constraint is the lack of arable land in one of China's most arid regions. The Deputy Head of Zhongning County was quick to point out that only one-third of the county's arable land can be utilized for wolfberries because, according to the official, Central Government guidelines require the remaining two-thirds of the county's arable land to be reserved for grains and staple fruits (such as apples). The area also lacks sufficient water supply, as fields adjacent to the Yellow River have irrigation, but there is not enough water for plots farther away. ¶8. (SBU) Zhu Yanhua, Chairman of the Board of the Ningxia Zhongning Zaokang Wolfberry Development Company, said he is struggling with how to help cooperatives access financing so that they can improve their livelihoods and expand their own operations, which also will benefit his company in the long-run. Zaokang is studying other financing models such as those used by dairy companies to help BEIJING 00005601 002 OF 002 herders expand their livestock herds by guaranteeing bank loans. Growers in Ningxia, however, are not able to access financing because their land, for which they have land-use rights and is their only asset, cannot be transferred, mortgaged, or used as collateral. PICCUTA