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Smallholder Inclusive Business Models: Case Study in Cattle/Beef Industry of China Nie Fengying Center for International Agricultural Research (CIAR, CAAS) June,2016. Bali Cattle/beef industry and Inner Mongolia case in China 70 Beef Price 100% 90% Nominal price(RMB/kg) 60 50 80% 70% Real price(RMB/kg) 60% 40 50% 40% 30 30% 20 20% 10% 10 Output of other meat Output of beef Output of pork Output of mutton 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 2000 0% 0 Inner Mongolia Tongliao city Chifeng city Overview Inner Mongolia case-Kerchin – Why Kerchin, leading enterprises, top 3 in beef processor; – To examine the relationship between the company, cooperatives, traders and smallholders; – To find if the model is inclusive. Inner Mongolia Kerchin Cattle Industry Co., Ltd. Traders Live cattle market Supermarket Cooperatives Farmers Slaughter and processing enterprises Own base (farm) Planting cooperatives Value chain diagram Farmers Restaurant Retail market Inner Mongolia Kerchin Cattle Industry Co., Ltd. Cooperation mode with farmers Own farms（Four） • Ensure the quality of cattle • Control food safety • Guarantee relatively stable supply • Cooperation with farmers in planting 50% 20% 30% Contract farmers • More than 3000 farmers • Cooperate with the financial sector providing subsidized loans for farmers, company provide security • Acquisition cattle by contract Farmers • No contract • Provide technical guidance and disease prevention. • Acquisition cattle by market price The success of Inner Mongolia model Competiveness Success Kerchin Company Big slaughter, brand reputation, Olympic supplier; Certification, HACCP,ISO14001, Halal, Organic (part); Advanced technology and equipment; Efficiency, diversified products, minimized waste, market segmentation (meat bar). Inclusive 50% from own production; 30% contract farmers , sell, loan, technical services; 20% others, selling, service; Jog creation, animal, feed, marketing, other services; Social benefit, not migrate to urban The success of Inner Mongolia model Four product lines Fresh frozen meat Large shopping malls and supermarkets Quick frozen, deep processing Industrial customers, restaurants Cooked meat Electronic commerce By-product deep processing The success of Inner Mongolia model B A August,2003 HACCP certification Environment Management December, 2007 System ISO14001 Certification August,2010 C D Organic beef cattle Organic beef product certification Official certificated by Malaysia August, 2003 Recovered in 2013 The roles and contributions of key players Farmer cooperatives: • Increase the “power” to negotiate with input suppliers , traders and beef processor; • Increase the economics of scale of “individual” farmer into group; • As a place for training, tech, share information about price, disease control, market shares. • Business Entities, provide with: • • • • • Market access and differentiation of products; Loan to contract farmers; Services to cattle farmers technician from the company; Job opportunity for locals; and Develop and strengthen the beef sector in China. The roles and contributions of key players Other Gov’t, provides • • • • • • Information and extension, public services, infrastructure; Subsidy to cow, scaled farms, cooperatives, credt recycling use of manure; and Develop the standards and regulation. Bank, provides Loan from public, cooperative and private. Feed company: Work together with extension company, officers or themselves in providing technical assistances for cattle farmers. Traders (middle man), • Market access; and • Information sharing. Producers • Provide cattle: quantity and quality. Challenges for this model in the future • Continue to adapt the market change, such as demand innovation, competiveness from local and exporter; • Continue to adapt the change in supply chain (regulation, public services, technology innovation ); • Improve payment system; • Strengthen the relationship with farmers. Discussion • New industry, high demand potential Capital intensive sector, and business potential. • Long way to go in term of small holder inclusive. • what we can learn from other cases? • Dissemination. Thank you for your attention!