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Models of Value Chain Development in Rural China

In the recent south-south cooperation workshop, participants had a field visit in Shanxi province to see the practice of  value chain development and market access. It is quite interesting.

The agri-business we visited included grain, livestock ( milk cow), and vegetables.  It was found out that there is always a " hub"  playing an important role in the value chain development as it connects the producers and traders.  For instance, in the value chain of milk production,  the model is " enterprise+base+ruran HH" . The enterprise has the contract farming with farmers. It pays some money to farmers before sowing.Then the enterprises gave seeds to farmers, and farmers plant and manage the corns. After the harvest, the enterprise will get the corns and pay farmers with the advance payment deducted. The enterprise has its own milk cows but also allow farmers to raise their own cows in the enterprise' yard.  The milk is sold to a big dariry company. Throught the whole chain, the enterprise bears all the risks: production risk, livestock risk and market risk. 

In another model " supermarket+rural cooperative+farmers"  , the rural cooperative is critical in linking small farmers to market. Farmers have shares of the Rural Cooperatives both in terms of money and land. The Rural Cooperative organized farmers to plant and represents farmers to negociate with supermarkets. The Rural Cooperative distributes the profit once a year. The distitution will be based on the production of farmers contribute ( 60%) , and the share a farmer has in the cooperative ( 40% ). it is quite obvious that with the rural cooperatives, farmers are organized to use the same seeds, plant same crops, follow the same standard, and harvest almost in the same time. Due to the scale of production, the Rural Cooperative has better bargin power. In this site, the supermarket also rents some green houses of the Rural Cooperative and does the contract farming. 

There always a concern that whether small farmers can equally benefit from the value chain development. I think as long as small farmers can benefit and not further pushed to the magine, it is accepatable. Because of the different endowment, it might be difficult to equally benefit everyone, but without those taking the lead and promoting to market, small farmers would have little chance to benefit from market development.

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