AB InBev started promoting contract farming of barley in China in 2010. It purchased 53,000 metric tons of malt from Gansu, Inner Mongolia autonomous region, Jiangsu province and Xinjiang Uygur autonomous region in 2013, and it plans to buy 10,000 tons more this year. The purchase price is set 0.06 yuan per kg above the market price.
Wan Fushi, a consultant in the grain and oil crops division at the Ministry of Agriculture, said the program will help farmers learn more about crops and client preferences and better adapt to market demand.
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One of the program's highlights is that the potential purchaser introduces research institutions to help farmers breed good-quality seeds before choosing farmers to plant the crops.
It creates a win-win situation among farmers, malt factories and the brewer, by sharing interests and risks and adopting advanced technology, Wan said.
"Contract farming" is not a new concept in China. It dates back to the Qing Dynasty (1644-1911), when businessman Hu Xueyan ordered silk from farmers in Zhejiang province through a system of contracts and down payments. Farmers would rear silkworms based on the agreements.
The Chinese government has been promoting modern contract farming since the early 1990s. The Ministry of Agriculture has issued guidelines to regulate contract signing and urged cooperation between farmers' cooperatives and leading food-processing companies.
Agriculture Minister Han Changfu has said that more than half of China's farming activities should be based on contracts by the end of 2017.
The Ministry of Agriculture, Ministry of Finance and the China Banking Regulatory Commission jointly released guidelines last August to promote the "modernization reform of agriculture", asking local governments to improve contract farming, which can limit price volatility.
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