The Project will improve dryland farming in Gansu, Henan, and Shandong provinces, and is located in the transition zone from the northeastern to the central western plains along the middle reaches of the Yellow River. The Project will benefit about 600,000 farm households and improve the production capacity of about 120,000 hectares (ha) in 27 counties, cities, and districts. The Project will adopt a farm-to-market, value-chain approach that creates value for poor farmers, local agroenterprises, and consumers. It will introduce highvalue horticulture crops and improved crop and livestock management, farm technologies, and cultivation practices. Organic fertilizers and agrochemicals will be more effectively used and the quality of farm produce improved through support services provided by participating private agroenterprises. These include soil-testing facilities, agricultural extension and technology transfer centers, organic fertilizer facilities, machinery service centers, seed production centers, agricultural produce information centers, product-testing centers, and expanded horticulture markets.
The Project will develop about 29 partnerships between private agroenterprises and farmers using contract farming arrangements to strengthen farm productivity, and food production and processing capacity to take advantage of growing domestic and international markets. Sustainable production and processing partnerships according to the dragon-head concept will be used to develop crops and other outputs that are processed and marketed by the enterprise. The dragon-head agribusiness structure is a successful, vertically integrated enterprise model that has demonstrated the capacity to contract with a large number of farmers to improve rural incomes through value-chain linkages and efficiencies, access to higher-value markets, and employment opportunities.
The agroenterprises were selected using strict selection criteria and due diligence assessment of financial, economic, environmental, and social factors. They will be provided with long-term financing to expand their food processing and marketing operations.
Farmers will diversify and modify their existing traditional cultivation of low-yielding and low-value food crops to higher-yielding and highervalue crops. Their partnerships with profitable and expanding agroenterprises will ensure them higher prices for their outputs, premium prices for quality, and a guaranteed price at harvest time. Farmers' average income will increase by an estimated 15%-25% as a result of the Project. Technological improvements include (i) adopting high-yielding varieties and improved animal breeds; conservation agriculture techniques such as returning crop residues to the soil, minimum tillage, and soil conservation measures; water-harvesting techniques such as storage tanks, lined wells, and small check dams; and water-saving technologies such as drip irrigation, sprinklers, and pipes; (ii) minimizing the use of chemical fertilizers and replacing them with organic fertilizers, and minimizing the use of pesticides and herbicides; (iii) reducing postharvest losses with the use of advanced postharvest and processing equipment; (iv) intercropping within tree crops; and (v) upgrading vegetable greenhouses and vineyards.
Local government support services will work with enterprises and farmers to expand environment-friendly farming and processing practices. Local governments will provide project management that will support improved provincial and county project implementation, monitoring, evaluation, and national project coordination. The Executing Agency, the Ministry of Agriculture (MOA), the three provincial project management offices (PMOs), and the county PMOs were extensively involved in project preparation, including applying the criteria for selecting the agroenterprises and partnerships with farmers. These institutions will receive training to continue applying the criteria and financial administration, and to effectively monitor the performance of the agroenterprises and local government support services, and the delivery of financial and economic benefits to farmers. Training will also be provided on imprest account management, project implementation, and project performance management.
The expected impact of the Project will be reduced rural poverty in the project area of Gansu, Henan, and Shandong provinces with increased incomes and livelihood opportunities from the sustainable use of land and water resources. The expected outcome is increased agricultural productivity through the adoption of sustainable farming practices in the project area to support higher-value, on-farm and postharvest activities.
|Project Rationale and Linkage to Country/Regional Strategy
Most of the population in the project area depend on agriculture, and are poor and vulnerable. All of the farms are very small, averaging about 0.28 ha. The average rural household income is only two thirds of the national average. About 60% of household income in the project area is from farming, and rural unemployment and underemployment are significant. Farmers have limited access to markets and technology to diversify into higher-value crops. Over the years, poor farming practices have accelerated land and water resources degradation. As a result, farm productivity poses a threat to the environment including land and other natural resources. Sustainable farming is under threat with ever-decreasing water resources. This has caused declining soil fertility and productivity, increasing farm input costs, and decreasing farm incomes. The correlation between land degradation and the incidence of poverty is strong. Implementation of simple water and land conservation practices can improve fertility and stop land degradation. Sustainable farming practices need to be strengthened and support provided for undertaking higher value on-farm and off-farm activities, increasing agricultural productivity and farm incomes, and reducing poverty by linking farmers to local agroenterprises.
In the project area, all of the participating enterprises have already established effective relationships with smallholder farmers. The contract farming approach has been successfully adopted and has helped farmers secure cheaper inputs and produce higher-quality products at premium prices. In this business model, an enterprise links with a production base of contracted farmers (either direct or through agents) and farmer associations.
The Project has strong commitment from the stakeholders to introduce sustainable farming practices including the use of contract farming through local enterprises, to adopt a farm-to-market, value-chain approach; and to strengthen agriculture extension services. It also has a wider demonstration and replication impact within and to other provinces to address rural development issues including sharing experiences and improving the adoption of lessons. This approach is fully consistent with the PRC's 11th Five-Year Plan to promote conservation agriculture, crop diversification, use of improved crop varieties, and soil and water conservation. Overall, the Project will promote sustainable farming practices and technologies to address land degradation and reduce poverty.