E-com­merce key to mod­ern­ized farm­ing

China Daily European Weekly - - Cover Story - Zhang Qingfeng The au­thor is di­rec­tor of the en­vi­ron­ment, nat­u­ral re­sources and agri­cul­ture di­vi­sion of the East Asia depart­ment of the Asian De­vel­op­ment Bank. The views do not nec­es­sar­ily re­flect those of China Daily.

To de­liver the four el­e­ments of in­ter­net plus agri­cul­ture, there is room for the gov­ern­ment and the pri­vate sec­tor to work to­gether

The 19th Na­tional Congress of the Com­mu­nist Party of China, held in Oc­to­ber, called for im­ple­ment­ing the na­tional strat­egy of re­vi­tal­iz­ing ru­ral vil­lages and town­ships. So-called “in­ter­net plus agri­cul­ture” was iden­ti­fied as an im­por­tant tool for mod­ern­iz­ing agri­cul­ture and sup­port­ing the strat­egy of re­vi­tal­iz­ing vil­lages.

Agri­cul­ture em­ploys more than 27 per­cent of the coun­try’s pop­u­la­tion but con­trib­utes less than 9 per­cent of its gross do­mes­tic prod­uct. This im­plies that there is large po­ten­tial for in­creas­ing pro­duc­tiv­ity in the sec­tor.

In­ter­net plus agri­cul­ture is a plan to link the en­tire agri­cul­tural value chain from pro­duc­tion to mar­ket­ing through in­ter­net-con­nected net­works. It aims to en­hance mar­ket ac­cess through a two-way au­to­mated in­for­ma­tion ex­change sys­tem be­tween pro­duc­ers and con­sumers. It pro­vides con­sumers with prod­uct in­for­ma­tion (in­clud­ing lo­ca­tion and qual­ity), while sup­port­ing pro­duc­ers with ac­cess to mar­ket in­for­ma­tion and pro­duc­tion sup­port ser­vices.

An ef­fec­tive sys­tem for in­ter­net plus agri­cul­ture will re­quire four key el­e­ments: an e-com­merce plat­form, agri­cul­tural lo­gis­tics, farm­ers’ par­tic­i­pa­tion and a trace­abil­ity sys­tem for prod­uct safety and qual­ity.

First, there has been sig­nif­i­cant progress es­tab­lish­ing an e-com­merce plat­form, but many ru­ral e-com­merce stores face steep low-price com­pe­ti­tion. So far, 3,000 agri­cul­ture-re­lated web­sites ex­ist with dif­fer­ent scales of users.

On Taobao, there are 1.63 mil­lion stores at vil­lage and town lev­els that are en­gaged in the on­line mar­ket for agri­cul­tural prod­ucts. This de­vel­op­ment has greatly con­trib­uted to the im­prove­ment of qual­ity of life in ru­ral China. How­ever, farm­ers’ profit mar­gins re­main low de­spite the in­creas­ing sales vol­ume. In a re­cent sur­vey con­ducted by China Agri­cul­tural Univer­sity, many op­er­a­tors said they can­not bear the high pro­mo­tion fees and com­plained about the “rank­ing based on price” mech­a­nism of the large plat­forms.

Since many spe­cial­ist pro­duc­ers are com­pet­ing on qual­ity, this makes it very dif­fi­cult for them. For these sell­ers to sur­vive in this com­pet­i­tive mar­ket, they will have to join the low-price com­pe­ti­tion with “sales at a loss” to gain sales vol­ume. For ex­am­ple, eggs from Yicheng, Hubei province, are be­ing sold on­line at 0.80 yuan per egg, but the sell­ing price in the lo­cal mar­ket is 0.96 yuan per egg.

Without prof­its, shops can­not in­vest in new prod­uct de­vel­op­ment, qual­ity im­prove­ment and ma­te­rial de­vel­op­ment. Con­se­quently, it is dif­fi­cult to ad­vance know-how, which ham­pers es­tab­lish­ment of brand­ing for prod­uct dif­fer­en­ti­a­tion.

Sec­ond, China is the world’s largest pro­ducer and con­sumer of agri­cul­tural prod­ucts. Its agri­cul­tural lo­gis­tics sys­tem is re­spon­si­ble for mov­ing food prod­ucts from farms to the ta­bles of more than 1 bil­lion con­sumers.

For per­ish­able agri­cul­tural prod­ucts, a re­li­able lo­gis­tics sys­tem is es­sen­tial for in­ter­net plus agri­cul­ture. A re­cent study jointly con­ducted by the State Coun­cil’s De­vel­op­ment Re­search Cen­ter and the Asian De­vel­op­ment Bank iden­ti­fied sev­eral key chal­lenges in agri­cul­tural lo­gis­tics: scale of op­er­a­tions, pack­ag­ing stan­dards, prod­uct grad­ing and food safety, mar­ket in­for­ma­tion sys­tems and cold chain tech­nol­ogy.

Third, build­ing off­line ser­vice cen­ters in ru­ral ar­eas and at­tract­ing farm­ers to shop on­line are not easy tasks. There are two is­sues to be ad­dressed in this as­pect. The first is­sue is how to or­ga­nize small farm­ers. It is im­por­tant to set up ru­ral co­op­er­a­tives and select a few lead­ers who will help to or­ga­nize the farm­ers. These ru­ral co­op­er­a­tives and farmer lead­ers can also help in open­ing the on­line stores.

An­other is­sue is the dif­fi­culty of at­tract­ing young tal­ent who can un­der­stand the tech­nol­ogy to work for in­ter­net plus agri­cul­ture in ru­ral ar­eas.

Fourth, pre­ci­sion agri­cul­ture or so-called “smart agri­cul­ture” is an es­sen­tial part of trans­form­ing ru­ral agri­cul­ture in China. It is ex­pected that net­work-con­nected sen­sors — the so-called in­ter­net of things — can, for ex­am­ple, mon­i­tor soil mois­ture, air tem­per­a­ture and lo­ca­tion of prod­ucts in the dis­tri­bu­tion chain.

Feed­ing in­for­ma­tion col­lected from the in­ter­net of things into data anal­y­sis cen­ters can pro­vide spe­cial­ized real-time pro­duc­tion and man­age­ment ser­vices to farmer co­op­er­a­tives as well as prod­uct safety in­for­ma­tion to con­sumers. Ben­e­fits will re­sult from in­creased pro­duc­tion, re­duced in­put costs, re­duced en­vi­ron­men­tal pol­lu­tion and mar­ket­ing risks, and ac­cess to pre­mium mar­kets via trace­abil­ity ser­vices for agri­cul­tural prod­ucts.

How­ever, rel­a­tively high costs have be­come the key bar­rier pre­vent­ing the scal­ing-up of smart agri­cul­ture tech­nolo­gies. An ex­pert from China Agri­cul­tural Univer­sity found that a soil data mon­i­tor­ing sen­sor be­ing sold for about 3,000 yuan ($466; 382 eu­ros; £338) in the mar­ket can very eas­ily fail af­ter be­ing in­stalled at farms.

The poor qual­ity and high cost of the de­vice can eas­ily cost the farm­ers and/or own­ers a main­te­nance fee as high as 5,000 yuan per mu per year. Since one hectare equals 15 mu, this amounts to 75,000 yuan per hectare.

To de­liver the four el­e­ments of in­ter­net plus agri­cul­ture, there is room for the gov­ern­ment and the pri­vate sec­tor to work to­gether. In­ter­na­tional fi­nanc­ing in­sti­tu­tions like the Asian De­vel­op­ment Bank can also play an im­por­tant role.

Since Alibaba and JD.com are fo­cus­ing on ru­ral e-com­merce plat­forms, the gov­ern­ment and the ADB may pri­or­i­tize their in­vest­ments in ac­tiv­i­ties as­so­ci­ated with pub­lic goods.

These could in­clude pro­vid­ing good broad­band cov­er­age to vil­lages; build­ing ru­ral roads in un­der­de­vel­oped ar­eas; es­tab­lish­ing pub­lic big data plat­forms in­volv­ing the ru­ral econ­omy; mak­ing the trace­abil­ity sys­tem for agri­cul­tural prod­uct qual­ity eas­ier for small farm­ers; build­ing cold chain lo­gis­tics fa­cil­i­ties; and strength­en­ing the ru­ral credit sys­tem plat­form.

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