Editor’s note: This article was translated and compiled from wenxuecity.com and various other sites, and addresses the issue of the high prices of organic food in China. According to wenxuecity.com, China’s tarnished reputation about food safety standards, and a lack of trust in producers and certification staff are affecting the supply and demand of organic produce which has a knock-on effect on prices and ultimately holds the industry back. Despite attracting a growing number of honest producers, it seems like China’s organic food industry is facing an uphill battle.
Organic vegetables in China are expensive with prices per 500g usually costing tens of RMB, a price that’s anywhere from double to ten times higher than non-organic produce. On November 11, a netizen posted the following questions on a Sohu forum specializing in ecological agriculture, “Why is organic food so expensive? How high are the profit margins? Is it possible to reduce profits in favour of consumers?”
“We struggle with these questions every year,” Said Xiao Xiao, the manager of Hunan Boye Organic Agriculture Co., Ltd. (referred to as Boye hereafter). According to her, there is a direct correlation between the high price of organic produce and the cost of production. At Boye, one worker is in charge of up to three acres of land. They must receive an annual salary of 30,000 RMB but each acre requires 8000 RMB of organic fertilizer. As a result, it costs three times more to cultivate and grow organic vegetables. What’s more, organic produce requires having a delivery service; the cost of logistics alone makes up half of the overall cost price.
Lack of trust jacks up prices
In many countries, including Japan, the US and the UK, the cost of organic food is only 20-30% higher than non-organic products. When comparing China to Japan, Xiao Xiao puts Japan’s lower costs down to the country’s highly professional service system. Their agricultural facilities and logistics system are extremely efficient, thus allowing ten people to manage 300 acres of land. In China however, because of its inefficient agricultural system and lack of credibility, one has to do everything oneself [to ensure good quality], which forces higher costs onto the whole supply chain.
At the beginning of the year, Shen Dongshu, the Chairman of Fuping Chuangyuan – a new eco-farm on the outskirts of Beijing – stated that the price of organic food in China is based on supply and demand. China’s agriculture industry is still on a learning curve; aspects like logistics and technology have to continuously improve. Moreover, the loss of credibility also significantly raises the transaction costs. “Originally, the intention was to split the work among partners, but as Xiao Xiao said, there is a lack of trust so you just end up doing everything yourself,” Shen Dongshu said.
Liu Peijun, the Chairman of Express Channel Food Logistics Co., LTD., agrees that lack of trust affects the price of organic produce in China. According to her, credibility has an enormous impact on the cost of logistics. At present, delivery handovers must be carried out face to face and often means waiting around for a long time. In one day, there may only be time to deal with 10-20 orders. However, when trust is not an issue 40-50 orders could go out in one day.
Zhang Jianwei, the CEO of Organic and Beyond, thinks that when comparing the price of organic to non-organic produce, “people shouldn’t ignore the fact that traditional prices don’t include the additional cost of safe food production methods. The reason why organic food in the US and UK is 20-30% times more expensive than non-organic products is because this price includes the additional costs involved in producing safe food.”
Reasons why consumers lack trust
Of course, the issue of trust extends much farther than dealings between the producers, staff and logistics companies. Consumers have very little faith in Chinese organic produce and rightfully so. The organic food market has been tarnished with “fake organic” scandals, and corruption. As a result there is a lack of trust in certification management and allocation, a lack of trust in the actual producers’ methods and a lack of clear-cut national standards for issues like heavy metal limits.
Giving “presents” to certification staff is also fairly common, and companies may cheat by using one method during certification and then other methods the rest of the time. Some people also argue that while organic producers may indeed refrain from using chemical fertilizers and pesticides, the ground water they use may be heavily polluted, creating “contaminated organic produce.”
In a country plagued with pollution and lack of transparency, building up trust between consumers and honest producers is a huge challenge. The government must promote knowledge of organic food and allow greater oversight of the organic food industry. What’s even more important though is that organic food still isn’t the solution to unsafe food.
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Keywords: organic food in China organic produce; China’s agricultural industry
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I think profit margins must be extremely high. The cost of logistics and labour are lower in China regardless of inefficiency. If you offered a farmer in Europe 30,000rmb for a years work he would laugh at you. There seems to be some crazy notion in China that the more you gotta pay for something the better it must be. Eating healthy food in this Country is not possible for the average person. No way I could trust domestic organic produce in China.
Jan 09, 2014 15:31 Report Abuse
There are lots of bad economic news for almost everything, such as falling mortgage prices and joblessness and so forth. However, a few items of not so good news hit where it hurts, such as that the price of chicken wings and other common game-day snacks are going up currently. Get more data at https://personalmoneynetwork.com
Feb 22, 2014 16:40 Report Abuse
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