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Sascha Matuszak

China’s Organic Food Cooperatives Must Overcome Trust Deficit

(Via Bigstockphoto)

Until recently, Chen Tao (@陈涛哥在成都) worked at Alibaba, a Chinese Internet company, as an in-house censor deleting inappropriate postings. Now, he drives six hours every weekend from his home in Chengdu, the capital of Sichuan province, up into the mountains to the north of the city to purchase wild mushrooms, free range eggs and organic honey.

Chen founded Nanxiachun Ecological Farming (@南夏春生态农业) in 2011 with his friend Liu Zhihong (@江鸟飞天) to sell organic countryside produce via direct home delivery to a few hundred families in Chengdu. Liu started this business out of concern for food safety for his child. He is bankrolling Nanxiachun with the profits from his successful cosmetics business. Chen and Liu have already spent one million RMB (about US$160,000) on their business and have yet tosee any returns, but the two entrepreneurs are undeterred.

Nanxiachun is just one of hundreds of entities around China entering the organic farming business. Organizations like Share the Harvest and Little Donkey in Beijing, and Tony’s Farm in Shanghai run urban farms and farmer’s markets, while experimenting with community supported agriculture (CSA) cooperatives and buying clubs through selling produce online and over social networks. Some initiatives, like the Beijing Organic Farmer’s Market, have seen tremendous growth meeting the demand for safe food from China’s middle class. The fair began in 2010 as an art project, and now boasts more than 60,000 followers on Sina Weibo and grosses 10,000RMB weekly for farmer-producers.

These urban farmers represent the latest development in a back to the land movement that arose in the 1990′s outside China’s most developed cities. Back then, urban nostalgia for country living gave rise to rural bed and breakfast hotels and restaurants known as nongjiale (happy farmhouses), and the model proved very successful in raising rural incomes. The model reached a peak in 2006, marked by a visit from Hu Jintao, then China’s president, to the “original” nongjiale outside Chengdu and the announcement of the slogan to promote a “New Socialist Countryside,” incorporating “multi-functional” and “ecological” agricultural methods to increase productivity and establish clear standards for green and “hazard-free” food. But local governments used rural tourism and ecological farming as an excuse to remove farmers from their lands and sell land use rights to developers, while massive conglomerates like the Wanda Group and COFCO snapped up land from peasants with small plots.

In the past few years, the problems of food safety and pollution in China have become more acute than ever. Now, the city folk are taking the idea of organic farming more seriously; Chen is a perfect example. But Chen faces major hurdles, such as guaranteeing the organic pedigree of his produce.

Fortunately, there is a growing number of Chinese experts who can help entrepreneurs like Chen, as the idea of organic production catches on. Shi Yan, director of Beijing-based Share the Harvest and the chief operator of the Little Donkey Farm, has a Ph.D. from Renmin University in agricultural ecology. She has authored several studies on organic agriculture in China and also spent time in America studying the concept of CSA. “CSA is the starting point for a rural renaissance,” said Shi, “New agricultural methods and new farmers – young people willing to stay in villages and work there – will create a new village model.”

Steffanie Scott, associate professor in the environmental management at the University of Waterloo, has studied organic agriculture in China since 2010. According to Scott, the Chinese CSA model differs greatly from its original concept in North America, in part due to extreme lack of trust between urban consumers and rural producers.

“In the West, the CSA illustrates an alternative economic model in which a producer’s costs, including the costs of environmental stewardship and economic risk, are divided fairly among consumers,” wrote Scott in a summary of her research findings. “Most Chinese CSAs operate more closely to a dominant market approach, with producers as entrepreneurs taking the risk, consumers dictating choices, and the use of market-based price setting.”

Establishing this trust can be the key to success. Little Donkey Farm, one of the first CSA cooperatives in the nation, grew from less than 50 members in 2009 to about 1000 today – growth Ms. Shi attributes to strong relationships built up between the farm and urban consumers, rather than government support and certification.

Chen now spends much of his time in rural Pingwu county dealing with his suppliers. The farmers tell him that organic farming costs too much time and money. Some try to disguise defective eggs by placing Nanxiachun’s company logo over cracks and others buy up cheaper mushrooms and try to pass them off as organic. Chen also mediates between the Nature Conservancy, an environmental group working in a nearby national park, and the farmers, who complain that protecting the park’s wild pigs is costing them money in destroyed crops.

In addition, obtaining organic certification in China is an arduous, expensive process and often marred by corruption. Supply can be unreliable and many organic farms suffer from cash flow problems.

The International Federation of Organic Agriculture Movements estimates China’s organic market to be worth more than $1 billion, but it makes up 1% of the overall foodstuffs market. The American organic industry, in contrast, is worth more than $30 billion and commands 10% of the overall market.

For private venture capitalists and foreign producers, this represents great growth potential, but the concerned Chinese entrepreneurs may have loftier goals in mind as well. “If only city folk and farmers can work together and learn to trust each other,” said Liu on the long drive back to Chengdu, “then we can make money, protect the environment, maybe even save China.”

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Sascha Matuszak

Sascha is a Chengdu-based writer and journalist. He edits chengduliving.com and you can see more of his work on his personal blog, saschamatuszak.com.