Research on Agricultural Co-efficiency of Farmer Professional Cooperative Unions

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School of Economics, South-Central University for Nationalities, Wuhan 430074, China

1　Introduction

Over the years, various farmer professional cooperative unions (FPCUs) have emerged and flourished along with development of rural economy. Compared with the independent cooperatives, the FPCU can integrate the union’s structure and have more cooperation in business, both in a wider range, it also can let every member of the union exchange the market information efficiently, and adjust the circulation of cash products, share the technology, generate a mechanism to complement each other’s advantages and help each other. As an advanced organization, FPCU is operated under democratic management and economic assistance between each other, and constituted by several individual farmer professional cooperatives voluntarily, to achieve common interests by expanding the industrial chain, developing their competitiveness in crop production. The "No.1 Central Document" in 2016 supported the farmer cooperative to develop the industry of agricultural products and market circulation and the direct supply and selling in agricultural products. Further, the "No.1 Central Document" in 2017 pointed out the importance of reinforcing the standardized construction of farmer cooperative and developing the integration of production, supply & sale and credit system. Nationwide, 153.1 thousands of FPCUs have been established, including 100 million individual households (42% in whole country) at the end of December 2015[1]. At the same time, for developing market competitiveness, and reducing the cost to run FPCUs, different farmer cooperatives have played different roles in industry chain and have established the union, particularly in some developed areas (Shandong, Zhejiang, Hubei,etc.)[2]. Compared with the individual cooperatives, FPCUs have many advantages, such as more resources, wider commercial channels, bigger influence and more support from government[3]. In May-July 2015, the members in project of research on the agricultural co-efficiency of farmer professional cooperative union conducted a survey in Hubei Province, by selecting some typical cases including JingChuFuMin FPCU in Jingzhou City, ChunLu FPCU in Honghu City, FuWaSanFeng FPCU in Jianli County, for sustaining FPCU’s prosperity and giving rational advice for developing the commercial mechanism of FPCU. This paper analyzes the basic data of those FPCUs, and the benefits they got through the joint venture, and at last discusses the main problems in FPCUs.

2　The development of FPCUs in Hubei Province

2.1ThedifferentdevelopmentsituationofFPCUsJingChuFuMin FPCU, the first FPCU in Jingzhou City of Hubei Province, was constituted by 8 agricultural machinery professional cooperatives (AMPCs) voluntarily, and this FPCU was registered at industrial and commercial bureau in June 2013. Today the FPCU has 11 associate contractors including 9 cooperatives such as JingZhouFuMin AMPC, JingZhouYinXing AMPC, JingZhouHongDa AMPC and 2 strategic partners, Tianjin Tractor Manufacturing Corporation and JingZhouLaiEn Agricultural Machinery Corporation. By the end of 2014, 1 261 members and 1 332 agricultural machines including transplanting machines, harvesters, tractors and other large agricultural machines were employed in the FPCU, the area for garage and business was 5.8 ha, with a warehouse and business area of 5 ha. The total asset was 68 million yuan and more than 670 000 ha for its annual working service. Rapid business development has been achieved since the FPCU was established, the influence was expanding fast, and two AMPCs of this FPCU were awarded "National Demonstration Agricultural Machinery Cooperative" by the Ministry of Agriculture. Five AMPCs of this FPCU were in charge of the social service system of agricultural machinery in Hubei Province supported by specific fund, and nine AMPCs of this FPCU participated in the professional technology promotion sponsored by the ministry, province and city.

HonghuChunLu FPCU, a comprehensive union constituted by 25 professional cooperatives and food acquisition & processing companies which have technology, machines and capital for agricultural production, was registered and established in October 2013. The register capital was 160 million yuan and the annual turnover was beyond 100 million every year. Today, the FPCU has 25 professional cooperatives, 3 000 ha farmland, 2 450 workers including 39 experts such as agronomist, 55 big or middle size tractors, 62 small tillage-machines, 32 harvesters, 5 repair equipments, 6 000 m2warehouse in total, and 1.3 ha cement drying yard, 52 greenhouses for sprout cultivation (1.72 ha in total), and 150 m2greenhouse for germination.

JianLiSanFeng FPCU, which has more than 2 000 workers, was established in December 2013 by the proposal of Hubei FuWa Corporation and sponsored by 9 industrial sprout cultivation centers. Today, this FPCU has reinforced its economic strength, now they have 2 airplanes for plant protection, and more than 1 000 big, middle and small size agricultural machines.

2.2ThesamecharacteristicsofFPCUs

2.2.1Constituted by strong individuals. In recent years, the FPCU has developed rapidly in Hubei Province, but there are many problem in the FPCU operation, such as too small business size, loose management, weak position in market. And the members of FPCU don’t have stronger ability in capital, risk insurance, management and so on. In 2013, the Industrial and Commercial Bureau of Hubei Province and the Provincial Department of Agriculture issued a documentThePracticalAdvicesaboutHowtoRegisterandManagetheFPCU, and Hubei was the second province who published FPCU register policy after Tianjing City. This policy has not only given the legal status for FPCU as cooperative, but also encouraged farmers to establish FPCU to become stronger in the market and have more capital, to integrate their resources and to win the future together like JingZhouFuMin FPCU, HongHuChunLu FPCU and JingLiFuWa FPCU[4].

2.2.2Fully developed democratic management system. To keep prosperous, the FPCU has insisted on making democratic decision, business management, and other regulation voluntarily equally and mutually beneficially. Almost all the FPCUs have a rational institution run by council, permanent council and supervisory committee. The members of council are councilors of cooperatives which are constituted by FPCU, the council can modify the FPCU’s constitution, the other regulations and have the right to election and to recall in the open and transparent prerequisite. It is also in charge of review about the development planning and annual business management plan of the FPCUs.

2.2.3Reasonable setting of internal service agencies. In order to ensure the business running in good conditions, the FPCUs set up various internal service agencies reasonably. For example, JingZhouFuMin FPCU formed 7 departments such as contact department, production department, the training center, the repair center, the supply center and so on. Those internal service agencies are rationally settled and divide the work properly. Like the business department in charge of production goods purchase like oil, and agricultural machine & parts supply, it is aimed at providing the social services like automating cultivation & harvest and agricultural repair and so on with the help of all departments.

3　The co-marketing achievements of FPCUs in Hubei Province

3.1Innovatedservicepatternandimprovedmanagementefficiency

3.1.1The agricultural industrialization. Nowadays, the shortage of rural agricultural labor is deteriorating, due to limited scale of farmland and young people leaving home and working in city, the cost of labor in countryside is rising, and only a few people are still farming especially in the suburbs. For example, the daily wage for rice cultivation was 100 yuan a day for each labor, and rose to 210 yuan a day in 2015, almost double price. For the prosperity in agriculture, for maximum the farmland use and helping farm households to improve their efficiency, the FPCUs exchanged their views with rural governments for land transaction to make agricultural industrialization become easier, make the crop production automated, standardized on a large scale[5].

3.1.2The agricultural machinery service. The needs of farm households for mechanizing production are increasing, to utilize this change in countryside, the FPCUs carried out the agricultural machinery service for farm households in crop production (single task or the whole production). There are some successful examples, JingChuFuMin FPCU seeded 1 500 ha farmland and cultivated 7 200 ha farmland and harvested 7 000 ha farmland by supplying this service in JingZhouSanHu farm and JiangBei farm. JingChuFuMin FPCU covered 90% area in mechanizing crop production by the agricultural machinery service in the same place and this service covered 47 300 ha farmland and more than 8 000 farmer households in Jingzhou City. By mitigating the difficulty in crop production, it has saved more than 18 million yuan for farm households in farming.

3.1.3The trans-regional agricultural service. The trans-regional agricultural service was carried out to increase the incomes of members of FPCUs, and modernize the local agriculture by full FPCU’s advantages in resources, information and size. Taking JingChuFuMin FPCU as an example, after this FPCU was established, it gained a lot of profits by carrying out the trans-regional agricultural service (the core is FuMin AMPC) in long periods, the number of agricultural machines in this service rose from 20 to 70, and the service area and incomes were doubled. In 2013, this FPCU went to south twice with more than 70 high-performance combine-harvesters for the trans-regional agricultural service, harvested more than 5 000 ha rice area, earned more than 820 million yuan and more than 350 million yuan pure profit, this FPCU went to Guangdong Province and Guangxi Zhuang Autonomous Region with 63 caterpillar harvesters for harvesting the early season rice in 2014, earned 410 million yuan, and harvested more than 2 600 ha rice area.

3.2Managementintegrationandhighcomprehensivebenefits

3.2.1Carrying out integrated management system. To integrate the resources and the management in FPCU, and reduce the unnecessary process and cost in business, the FPCUs considered the staff’s services as entry point, took actions to integrate 5 parts in FPCU—the technical training (by gaining more sun project training for core members), the service training, the production goods purchase (by unifying the purchase, reducing unnecessary processes and saving the money), the agricultural machinery service, the cooperative agricultural product selling (more initiatives in market) and the management mode. The integrated agricultural machinery resources can fully improve the utilization of agricultural machines and gain more profit. And HongHuChuLu FPCU cooperated with China Grain & Oil Storage Company, making its member’s product selling more convenient, and improving the room of profit.

3.2.2Normalizing the price of agricultural machinery services. The different prices of different agricultural machinery services are related to its cost, and the service’s market price, after this service price list is made, the FPCUs asks all its AMPCs to charge according to the service price list strictly. In general, compared with the individual household and individual cooperative, the FPCUs have better quality in agricultural machinery service and lower price for it (5%-10% lower than market price), so the FPCUs can gain high evaluation and dominate agricultural machinery services market in some places for those advantages.

3.2.3Reinforcing the profit chain in FPCUs. The FPCUs has 3 integrated schemes according to 3 standards in profit distribution to form a normalized profit chain. The first standard—according to a fixed proportion of annual production goods quantity to distribute the profit (HongHuChunLu FPCU, the proportion is 3%), the second standard—according to the share to distribute the profit, the third standard—according to the 1‰ turnover of the FPCU’s cooperative along with its original share as the share of next year. By carrying out those schemes, the FPCUs can normalize its departments, improve its member’s enthusiasm for union and reinforce the cohesion of FPCUs.

3.3Optimizingthestaff’strainingandpromotingtheuseofnewtechnology

3.3.1Intensive technical training. The FPCUs emphasize the household’s ability to improve crop production, and they hire many experts and technicians from agricultural (agricultural machinery) departments and agricultural machinery production company, establish the technique training class to guide the household one by one, and the main training subjects include the automated rice cultivation, automated cole cultivation, and safety production and so on. The FPCU has established more than 30 training classes and trained more than 2 000 technicians who do not belong to the FPCU in 1-2 years.

3.3.2Increasing the application of new technologies. In the period of 2013-2014, JingChuFuMin cooperated with the agricultural machinery department in Hubei Province and Jingzhou City, purchased more than 150 agricultural machines, sponsored technique training class 21 times, organized scene teaching 15 times, promoted and applied new technology in industrializing cultivation, the automating rice cultivation and the automating cole cultivation, accomplished 5 automating technical projects in Hubei Province and 6 agricultural (agricultural machinery) technical experiment in Jingzhou City for promotion, so they are praised generously by the Hubei Province, the Agricultural Bureau of Jingzhou City and the Agricultural Machinery Department.

3.4SolvingpracticaldifficultiesandincomeissuesforeverymemberBy strengthening the application of agricultural machinery in crop production and land transaction, the demonstration and application of new technology in agricultural machinery, the FPCU expanded the union, increased the number of machinists and the incomes of households. In 2013, JingChuFuMin FPCU gained 298 million yuan by providing the agricultural machinery service, distributed 286.1 million yuan profits for its AMPCs (each AMPC gained more than 20% of its own profits last year). HongNiangZi AMPC, HongDa AMPC, and HaoHan AMPC have not provided the mechanizing cultivation service for lack of technicians, after they joined the FPCU, this problem has been solved by integrated cultivation area and technicians training. These AMPCs cultivated 1 400 ha farmland and gained extra 252 million yuan in technical area. YinXing Cooperative wanted to deal with 80 ha farmland in land transaction, needed to invest 60 000 yuan at one-time, for lack of capital, they didn’t sign the contract in long period, but the FPCU raised more than 40 000 yuan from other members to make the contract signed on time. By signing the contract, YinXing Cooperative gained more than 310 million yuan only from one middle-season rice.

3.5CreatingproprietarybrandandseekingforsustainabledevelopmentBrand is the assurance of credit, brand is productivity. When a brand is established in the people’s mind, it can become a symbol of quality and a symbol of safety, and people will be relieved to purchase and consume. Honghu FPCU tries to create "Honghu Natural Regeneration Fragrant Rice" brand to enter the city’s supermarkets, this FPCU has rented 200 ha transactional land for the "regeneration rice" expanding to improve the multiple cropping proportion, increase the yield per unit area, promote the "Honghu Natural Regeneration Fragrant Rice" and the cultivation mode of "cultivated once, harvested twice", and try their best to achieve the goal of "one ton yield per mu (0.067 ha) and two thousand yuan in profit".

4　Problems of Hubei FPCUs in agricultural cooperation

4.1ThelimitedgrowthoftheFPCUsduetolackofpolicies

TheFarmers’ProfessionalCooperativesLawhas given the legal position of FPCUs as independent market economy entity, assured its legal person status, but has not any regulations of the cooperative’s union. At present, Hubei Provincial Government created a platform for FPCUs to register by the form of the local regulations, but for the needs of transaction security and the good market circumstances, this problem still needs the national government’s legislation to make sure the legal position of FPCUs in crop production and market transaction. At the same time, as the supervision mechanism has not been improved, the legal protection degree is not satisfactory enough, and the supervising agency can not really work, thus restricting the further development of the FPCUs[6].

4.2ThelackofenoughenthusiasmincooperationThe establishment of a cooperative union is an optimization action for every member that the FPCUs tries to unite all the basic cooperatives to strengthen its ability for common interests. Olsen’s theory has pointed out that individual interests are inconsistent with common interests, even their interests are consistent in object. For the basic cooperative’s representatives who want to unite, the yield of FPCUs is the common interests for member and its cooperative. If distribution is equal in basic cooperative (no extra personal profit), the "free riding" action will happen, and it will thus weaken the basic cooperative’s interior motivation for establishing the FPCUs, reduce effective social mobilization to other basic cooperatives, let alone authority.

4.3Heterogeneouscombination’sownproblemsHomogeneous cooperation in the same market is often established by the cooperative union in market competition. However, the social group composed of heterogeneous cooperatives is called the alliance. In the legal sense, the cooperative union belongs to the profit organization, while the social group belongs to the public welfare organization, which is different in its organizational nature, objectives and activities. In order to meet the market competition demand, homogenous organizations pay more attention to the interest demands of the organization itself. The union of heterogeneous organizations is generally based on the government limit or policy’s management other than its own demands[7]. In addition, there are other forms in the cooperation between cooperatives such as contractual unions and trade unions besides FPCUs.

4.4AseriousshortageofgoodemployeesWhile enhancing the capability of the single cooperative and increasing the total benefit, the FPCUs has become more rigorous about the quality and ability of its members, and the need for good employees has become more urgent. However, most of the members of the FPCUs are still relatively low in quality, and the risk of unexpected losses due to decision-making errors or improper management is relatively high.

5　Measures and suggestions

5.1UpgradingtheindividualcooperativestocooperativeunionsbyverticalgrowthandhorizontalunificationCooperative union can effectively alleviate the sharp contradiction between small-scale production and big market, improve the inequality between the management status of small farmers and big companies, further promote the horizontal integration (economies of scale) and vertical integration (economic) development. Only by uniting many individual cooperatives who want to cooperate and establish FPCUs with big organization and large service area can they have pricing power and representative position in negotiation[8]. Therefore, the development of cooperatives should attach importance to the combination of horizontal integration and vertical integration. The horizontal integration can integrate thousands of dispersed households, and strengthen the connection between them and financial institutions, such as providing guarantee through the FPCUs, and helping the cooperative to obtain credit funds. The FPCUs can solve the shortage of funds in its own development by establishing mutual funds. In the form of vertical integration, the first is to establish connection with agricultural enterprises to obtain cheap and fine agricultural production goods easily and reduce costs through group purchase. The second is to connect with the sales market, establish independent websites, build distinctive brands and expand market share. Thirdly, we will cooperate with the processing enterprises, implement social cooperation with enterprises, and try our best to build the most advanced production line for China’s agricultural product processing, extend the industrial chain, raise the additional value of the products and increase the farmers’ income.

5.2StrengtheningthestandardizedmanagementofthecooperativesAccording to the principles created by the cooperative union, it is necessary to insist on the democratic way of internal management. On the one hand, the democratic election of the co-operatives leaders should follow the principles including equality, justness, openness; on the other hand, the organizational structure of the cooperative organization should also be scientific and helpful to the organization scale advantage of the FPCUs. Moreover, positions at all levels should attach importance to the introduction of high-quality employees to enrich and strengthen the construction of the internal management of the institution, facilitate the FPCU’s management improvement by the process from "rule of man" to "rule of law". Following the market rules, the FPCUs should try to expand the service content and enhance its attraction[9].

5.3UtilizingthegovernmentinthedevelopmentofFPCUs

For each basic cooperative of FPCUs, there are problems in inconsistent interests between person and group, thus "free riding" action happened, weakening the basic cooperative’s interior motivation for establishing the FPCUs. Therefore, it is very difficult for the basic cooperative to establish the FPCUs. At this time, the government should utilize social resources which only belong to government to help individual cooperatives to establish the FPCUs. Meanwhile, the government can give scientific guidance to individual cooperatives about how to establish FPCUs, and the government can fully use its own unique social mobilization power and good social reputation, unite basic cooperatives with common interests in the same area efficiently and provide comprehensive and timely market information to cooperatives along with the financial support and technical guidance services. The International Labor Organization in 1999 proposed the initiatives to promote cooperatives, it is necessary for the governments to support cooperatives to establish a scientific organization in their nation which can protect member’s interests, such as cooperative union or alliance[10]. But we can not ignore certain hidden risks if the government is involved in the creation of cooperative union, too many government’s ideas will be carried out, lacking people’s own thoughts. Therefore, it is necessary to ask for views of all members and serve the common interests of the members. At the same time, it is important to maintain the independent self-government of the union, such as decision-making level candidates, development strategy formulation, major investment decisions and other initiatives, rather than being replaced by the government.

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