"Before, I could make only about 400 yuan a year, growing crops such as corn and peanuts," said Shen.

Farmers that don't participate in this type of cooperative - such as those in Anqiu City in Weifang, also a major center of ginger cultivation - are not as lucky as the residents of Laiwu.

According to Yang Chunqiang, deputy director of the Anqiu Agriculture Bureau, the average price paid for Anqiu's ginger was 0.8 yuan a kg on October 25, compared with about 10 yuan in November 2010.

"Oversupply is the main cause of the drop in price," said professor Xu Kun of the Department of Horticulture at Shandong Agricultural University, an expert in ginger planting and cultivation.

The root cause was the extremely high price of ginger last year, which resulted in an increase in the area planted with the crop, said Xu.

Farmers in Shandong have planted more ginger in the past two years as the sale price rose to 10 yuan a kg.

Xu estimated that ginger production in Shandong has increased by 50 percent this year, thanks to good weather and plentiful rainfall. In Laiwu, output has risen by 60 percent.

In the face of price uncertainty, Nie Binghua, director of the Shandong Economic Management Institute, suggested that all the growers in Shandong should adopt the large-scale model, similar to that in Laiwu.

"The individual farmers could not obtain sufficient market information (to hedge against risks)," said Nie.

Currently, Laiwu is home to 380 ginger-processing companies.

One of them is Manhing Vegetables Fruits Corp, China's largest exporter of ginger. It has acquired land-use rights for about 400 hectares and has signed contracts with more than 1,000 farmers to produce a total ginger-planting area of around 2,000 hectares.

Large-scale farming has not only enabled the company to increase output through the use of new technologies, but also to improve the farmers' earnings.

During the first three quarters of the year, Manhing exported ginger and related products worth $130 million.

The company's products are now seen on the shelves of the British supermarket giant Tesco PLC and in other stores in a number of European countries.

That may explain why the company can offer a reasonable price to farmers, despite the decline in the market price.

"Our price is about 10 percent higher than the market price for farmers who have a cooperative relationship with us," said Zhang Huayu, a manager at Manhing.

China Daily