A farmer displays ginger in the village of Guanzhuang in Weifang City, Shandong province. Growers have sought to enter cooperatives with ginger-processing companies to hedge against price fluctuations. Wang Zhide / For China Daily

LAIWU, Shandong - Although he's disappointed with the decline in his earnings compared with last year, Zhu Hengjun, a 52-year-old ginger grower, feels fortunate that he has signed a contract with a processing company that offers a competitive price. Had he not done this, Zhu may have been facing serious losses, in common with many other growers this year.

"I heard that a lot of growers have suffered losses this year. To be honest, I feel lucky because at least I didn't lose money," said Zhu, from Zhangli Village in the city of Laiwu in East China's Shandong province.

Currently, 70 percent of the area planted with ginger in Laiwu is jointly developed by farmers and enterprise, according to Diao Yuzhao, deputy head of the Laicheng district of Laiwu.

Laiwu has 12,000 hectares available for cultivation of the crop, which accounts for 20 percent of China's total.

Zhu sold 6,000 kilograms (kg) of ginger produced on his 1,330 square meters of farmland to a local company at a price of 1.4 yuan (22 cents) a kg in mid-October. In doing so, he didn't earn much money but did manage to balance his costs of around 8,000 yuan.

In recent years, Chinese farmers have often suffered from the severe price turbulence that has affected crops such as ginger, garlic and mung beans. The uncertainties have forced them to seek new ways to hedge against losses caused by price fluctuations.

The price of ginger has risen rapidly in recent years, prompting an increasing number of farmers to grow the crop, However, in late October it slumped by more than 70 percent, compared with the same period in 2010.

In Laiwu, a major production base for ginger, farmers have sought to form a targeted sales relationship with the processing companies as insurance against the risk of fluctuating prices.

In such a set-up, businesses sign contracts with farmers to acquire their rights for land use (in China, all the land belongs to the State and farmers are leased the right to use it). Meanwhile, the companies employ the same farmers to plant ginger on their behalf. Therefore the farmers can earn a fixed salary in addition to a payment for the transfer of land-use rights.

Shen Guihai, from Gongjiazhuang Village in Laiwu, is a beneficiary of such a cooperative model. He grows ginger for Laiwu Manhing Vegetables Fruits Corp, which in 2007 acquired the rights to use almost all the farmland in Shen's village.

He can earn around 10,000 yuan annually, plus 1,200 yuan in rent from the transfer of his land-use rights to the company.