Organic Agriculture is Booming--Even in China

ORGANIC FOOD
Cultivating Kinder Crops
Driven by fears of pesticide-poisoned foods, consumers are rushing to
buy organic. China is cashing in on the trend, with greener produce

By Bruce Gilley/WUYUAN Issue cover-dated February 22, 2001

WHEN THE CRAZE for organic food hit Western countries in the
mid-1990s, Wuyuan, a tea-growing county of 330,000 people high in the
hills of northeastern Jiangxi province, was perfectly suited to
benefit.

Here at the head of six different rivers, forests abound and the air
is clean. Factories are banned and cancer rates are almost nil. White
cranes from Siberia spend the winters here. Western scientists have
found two other bird species in the remote county that were long
thought extinct.

In 1997, the county's best-known product, its green tea, passed the
stringent organic-food tests of the European Union and was certified
for sale there. The same year, the county's monopoly green-tea
producer, Wuyuan Green Tea, was renamed Wuyuan Organic Foods. Since
then, the company has secured EU certification for organic mushrooms,
fungus and Chinese medicine ingredients and is now seeking
certification for chickens and sesame paste.

The company's exports to the West, still mostly tea, topped $3
million last year. That's not bad for a place whose most famous
export until now was a Song dynasty scholar named Zhu Xi who coined
the anti-capitalist slogan: "Focus on scholarship not on business."

"We were surprised when we realized that we had perfect conditions to
grow organic foods," says Hong Peng, president of Wuyuan Organic
Foods and a graduate of tea studies at nearby Zhejiang
University."People began to say: 'Wuyuan's environmental protection
is finally going to pay off'."

The rise of Wuyuan Organic comes against a backdrop of surging
Western demand for organic foods and a nascent but quickly developing
domestic market in China itself, driven by fears of unsafe foods.

Sales of organic foods by the country's 800 government-certified
producers reached $4 billion last year, of which about $140 million
comprised exports, both up 20% from a year earlier. While organic
foods were seen as a foreign eccentricity until recently, a series of
health scares in China over poisoned food sparked interest at home
too. Specialized supermarkets in China's big cities now stock
everything from organic soy sauce and lychees to delicacies such as
organic pig face.

"The term 'organic food' is now part of everyone's vocabulary," says
Shi Songkai of the semi-official China Organic Foods Research Centre.

With domestic demand for organic produce set to surge as consumers
turn their backs on pollution-laced crops, every province in China is
scrambling to find remaining patches of pristine countryside for
organic farming. While unchecked growth has turned much of China's
most fertile countryside into a toxic blight, some parts remain
comparatively unscathed, especially in the mountainous regions of
central provinces like Jiangxi.

The COFRC, set up by the Ministry of Agriculture in 1992 but now
under state-owned food company China Seeds Corp., has established a
certification scheme which closely mirrors the schemes in the EU and
the United States to monitor products. As in Europe and the U.S. they
check not only the soil, air and water quality to ensure the absence
of toxins which can enter the food, but also production methods to
ensure they are natural and not harmful to humans or the environment.
So far, Japan recognizes the COFRC's standards and Germany and France
are expected to follow this year.

TOXIC FOOD SCARES
Situated in a remote mountainous county covering 3,000 square
kilometres and with 59 farms under its ambit, Wuyuan Organic is
ideally suited for organic production. Just as the county's idyllic
surroundings keep its organic foods untarnished, growing bouts of
negative publicity about nonorganic foods in China is helping sales
too. Not a week goes by when the domestic media does not report
some startling revelation about the toxicity of the country's regular foods.

A study of fruit and vegetables sold in Beijing revealed that 20%
contained pesticide residues in excess of state standards, the China
Youth Daily reported last year. The COFRC says that illegal
pesticides continue to be sold widely, despite bans. News like this
has sent consumers scurrying for organic labels.

Wuyuan's big break came last year when the Shanghai branch of the
State Quality Inspection Bureau revealed the results of a study of 61
types of China's most famous teas. They showed that 19 of the teas
did not meet the lowest quality standards for metal and other
chemical contents, 13 of them because of high levels of lead. Most of
the offenders--some of which contained nine times more lead than the
maximum acceptable levels--came from producers around Zhejiang
province's heavily polluted Western Lake. The most famous of
those,Dragon Well tea produced by Western Lake Dragon Well Tea
Co.,saw sales plummet as a result, according to mainland news reports.

But it helped Wuyuan Organic's sales. The Shanghai Tea Drinkers
Association annual list of the country's 10 best teas, published in
December, had Wuyuan's flagship Dazhang Mountain tea in the No. 3
spot, its first appearance on the prestigious list. Hong expects
sales to double to around $6 million in the next two years, with most
of the growth coming from the domestic tea market.

"The China Tea Association criticised the Inspection Bureau for
releasing the report to the public. But I think they did the right
thing in letting consumers know the truth," says Hong.

As other regions latch onto the organic boom, however, Wuyuan
Organic will have to be nimble to prosper. Officials in neighbouring
Zhejiang province, for example, haunted by the spectre of seeing
their huge tea industry wiped out by damaging reports, have set up
their own organic-foods certification scheme with government
investment. While Zhejiang's scheme is not recognized by the EU, it
could pose a threat to Wuyuan's near-monopoly of the organic-tea
market.

Hong worries that if he doesn't move quickly, larger companies from
other provinces will snare the domestic market in organic produce.
One of his strategies is to branch out into other foods. He is now
seeking COFRC certification for bamboo shoots, peaches and pears.

The company was due to exhibit at Germany's Biofach organic food
fair, the world's biggest, for the fourth straight year in
mid-February. Hong says sales there are modest, but the information
he gains on consumer trends is invaluable. "We used to go there to
sell. Now we go to learn," he says.

But keeping up with the food giants could be tough. While Wuyuan is
a beautiful place to grow tea, it is four hours from the nearest
airport and five from the provincial capital, Nanchang. "We're in a
perfect place for production but not for marketing," says Hong.

To raise capital, the company is restructuring itself as a
shareholding company, hoping eventually to list shares on a domestic
market. But Hong says state banks and investors alike remain wary of
putting money into such a nascent industry.

The company's best option may be to link up with one of the big
domestic food groups that could give it the marketing network and
capital to survive the competition. Fuzhou-based
organic-fruit-and-vegetable producer Chaoda Modern Agriculture listed
on the Hong Kong stock exchange in December, for example, in
a sign of the growing clout of organic-food companies.

Either way, the company seems bound to be swallowed by carpet-baggers
from either home or abroad. For now though, Wuyuan Organic is
enjoying bumper profits as the global green wave washes into this
remote corner of China.
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