The litchi market in China

[Louis Proyect <lnp3@xxxxxxxxx>]

NY Times, September 17, 2004
In China, Farmers' Labor Bears Too Much Fruit
By KEITH BRADSHER

DALINGSHAN, China - On steep, terraced hillsides at the end of a muddy
track here in southeastern China grow some of the world's finest litchis,
walnut-sized fruit with pale, sweet flesh coveted by Chinese emperors and
commoners alike for centuries.

Tang Dynasty poets extolled the fruit in the ninth century, when special
couriers brought it to royal palaces. More recently, as industrialization
and capitalism have lifted millions of Chinese out of poverty, litchis have
become a fruit for the masses, and are shipped all over the world.

Yet in the last few years, litchi production has soared beyond anyone's
expectations. Retail prices have crashed, from $4 to $7 a pound in the
1980's for the best-quality litchis and $25 a pound during a bad harvest in
1993 to just 75 cents a pound now. For the most widely grown variety, the
lower-quality heiye, retail prices have collapsed to less than 12 cents for
a little more than a pound.

The plight of the litchi industry shows both the promise and the pitfalls
of China's remarkable economic growth and its shift to an awkward but
dynamic mix of capitalism and state socialism in recent years. As in many
industries, from television sets to washing machines and now to cars, early
success by a few producers led to a flood of investment, overproduction and
the evaporation of profits.

While business success often draws new competitors in Western countries,
the effect is outsize in China.

Each state-owned bank branch tends to funnel huge loans at very low
interest rates to investors in any industry that seems profitable, almost
regardless of whether other lenders are doing the same, bankers said. And
with a long tradition of news media censorship and a distrust of official
pronouncements, business executives and peasants alike tend to barrel
ahead, leery of believing admonitions against over-investment - until
prices plunge.

Among litchi producers, the problem was not so much loans, though these
played a role, but rather a kind of folk wisdom that litchi trees would
always be a good investment for families' savings. Growing litchi trees has
been a form of long-term investment for Guangdong Province peasants for
centuries. If they had a little extra money and did not need every last
possible sack of rice from their land each year to survive, they could
plant a handful of litchi trees and wait a few years for them to mature
into a more profitable crop.

Climbing incomes in the 1980's and early 1990's gave huge numbers of
peasants this option and many took it, disregarding warnings from academic
experts that a surplus would result.

Litchi production has risen almost tenfold in the last decade, to an
estimated 1.5 million tons this year. The annual harvest is poised to climb
as high as 2.5 million tons in the next few years as recently planted
litchi trees grow ever larger.

"If the output goes up that high, it will be a disaster for the market,"
said H. B. Chen, a professor of horticulture specializing in litchi at
South China Agricultural University in Guangzhou.

Zhao Jiqing, a barefoot, chain-smoking litchi farmer here with a cellphone
strapped to his belt, concluded that the summer harvest would be huge and
prices low after talking to farmers in areas where the crops mature earlier.

He sorrowfully pulled nearly three-quarters of the ripening fruit off his
trees and destroyed it, so as to save the trees' energy for next year, when
he hopes prices will be higher. "I'm kind of gambling that next year will
be better," he said.

full: http://www.nytimes.com/2004/09/17/business/worldbusiness/17fruit.html