Monitoring and Evaluation Results and Interpretation

Monitoring and Evaluation Results and Interpretation

Introduction

This is the fourth and final economic monitoring report for the project. The results are discussed for the 2000 data set (for all monitor farms aggregated and by project activity); then, the whole household and apple variety budgets are compared over the four-year period (1997 through 2000). No economic data is available for 1996 because the monitoring was not implemented in the first year of the project.

There are 60 monitored farms on the project. The number of farms by project activity is shown in table 5.0. Whilst there are 15 non project farmers, who are not targeted as part of the project extension activities, these farmers have, to a greater or lesser extent, adopted orchard improvements of grafting, new planting and improved management.

Table 5.0 Distribution of monitoring farmers by project activity

Activity / Number of farmers
Grafters / 15
Improved management / 13
New Planters / 17
Non-project farmers / 15
Total / 60

Note: New planters include one persimmon grower and one peach grower.

Definitions and terms

The meanings of the terms used in this report are best described by reference to the budget format used for the aggregation of the whole household data (Table 5.1).

Gross farm income is the total gross revenue from all farm enterprises (fruit trees, crops and livestock) as well as any farm related income from non-enterprise activities (such as the sale of forage which is not otherwise allocated in crop income or income from the rental of farm equipment). Gross farm income includes income from cash sales (from quota or sale in the market) as well as non-cash income, which is produce consumed on the farm by the farm household or by livestock.

Farm operating expenses include all expenditure items directly related to the running of the farm. These include all enterprises expenses (such as fertilisers, chemicals, packing materials, animal feed, hired labour, and the value of animal manure used on crops) as well as overhead costs not readily allocated to enterprises such as fuel and electricity, rent, and repairs and maintenance.

Gross margin (as presented in the enterprise budgets) is gross revenue for the enterprise less the direct operating expenditure for that enterprise (but exclusive of the overhead costs).

Other expenses, not specific to the operation of the farm enterprises, are taxation, debt servicing costs (interest and principal), cash family living costs, and capital purchase or development expenditure (which is a capital cost). There may also be income earned off the farm and off farm expenditure (such income and costs may be related to running a small business or for off-farm work).

Gross profit is calculated after deducting farm operating expenditure but before the costs of interest and taxation. Net profit is the profit after interest and taxation costs.

Net farm surplus (or deficit) records the cash and total worth situation for the farm after allowing for family cash living costs and the consumption of farm produce by the farm household, principal repayments on loans, new capital purchases and new development.

Net household surplus is calculated after adding off-farm income and deducting off-farm expenses. New borrowing is recorded only after calculating net household surplus but of course adds to the cash surplus available to the farm household. Generally, any negative cash household surplus must be financed by new borrowing or from drawing on savings.

Table 5.1: Definition of whole farm budget and key household indicators

Cash / Non-cash / Total worth / Comment
i / ii / i + ii

Gross Farm Income

/ Volume of enterprise output times price or value
Less: / Operating Expenses / Enterprise expenses (fertiliser, chemicals, animal feed, hired labour, value of animal manure used on crops), fuel/electricity, rent and repairs and maintenance
Equals: / Gross Profit
Less: / Interest / Interest on loans
Tax
Equals: / Net Profit
Less: / Family living costs
Principal repayments / Capital repayments for loans
Capital purchases
Capital development
Equals: / Net Farm Surplus
Less: / Off-farm expenses
Plus: / Off-farm income
Equals: / Net Household Surplus

2000 Data: Average results over all monitored households

Income by source of income

Fruit trees contribute the largest component of cash income (35.8%, up from 29.80% last year). 86% of the income from fruit tress is from the sale of apples, 14% from the sale of other fruit tree crops. Fruit trees provide a smaller percentage of total worth (cash and non cash income) (29%, up from 22.3% last year) (Table 5.2, Figure 5.1). This is a change from last year, when food crops comprised the largest proportion of total income; fruit tree income is now the largest component of total income. Income from apples alone is now similar to the total income from food crops (cash and non-cash).

Arable crops are the second largest component of total income (24.5%) and 56 % of this income is in the form of consumption on the farm by the household or by livestock; 44% of crop income results from sales in the cash market.

Livestock income comprises 17.3% of total worth of income (down from last year) and 13.4% of cash income. 61% of total livestock income is from cash sales and 39% in the form of consumption on the farm or in the form of animal manure used as inputs for cropping enterprises.

20.4% of total cash income is from off-farm sources (Table 5.2). This year there is very little new borrowing (which is now only 0.6% of total cash income, compared to almost 4.9% last year).

Operating expenses by type of expenditure

42% of gross cash farm income is reinvested in farm expenses of one form or another; 35% in direct operating inputs (Table 5.3). On a total worth basis, 40% of gross farm income (4345 Yuan) is reinvested in direct operating inputs.

The total worth of inputs is greatest for livestock; this is because significant amounts of crops grown on the farm are consumed by livestock enterprises. 73% of the value of all livestock inputs is in the form of food crops grown on the farm and only 27% purchased in the cash market (Figure 5.3).

Averaged across all monitor farms, 33% of cash operating inputs are for cropping (977 Yuan) and 43% for fruit tree crops (1226 Yuan, up from 821 Yuan last year) (Table 5.3). The non-cash worth of inputs into cropping is mainly in the form of animal manure and seed grown on the farm.

Other than direct crop and livestock expenses, the most significant item of operating expenditure is for fuel and electricity (167 Yuan); relatively small sums are spent on rent and repairs and maintenance expenditure (Figure 5.2, Table 5.3) although this can vary for individual farmers.

Other expenses by type of expenditure

The largest single item of “other” expenditure is family living expenses, which have a total worth of 4060 Yuan per household or 2554 Yuan cash and 1506 Yuan non-cash (consumption of produce grown on the farm). Cash family living costs are equivalent to 31% of gross cash farm income (down from 40 % last year).

On average, only 79 Yuan is spent on loan repayments and no interest is paid; 364 Yuan is paid in taxes.

On average, only 105 Yuan is spent on capital purchases and development expenditure (Table 5.3, Figure 5.3). This figure does however vary depending on project activity: Grafters spend on average 91 Yuan on capital improvements; improved managers 32 Yuan and new planters 262 Yuan (Appendix 1); this figure however, is dependent very much on individual farmers within the sample rather than being a consistent figure across farmers.

Key household indicators

Gross farm income, over all farms monitored, averages 11165 Yuan per farm. 25% of gross farm income is in the form of non-cash items and 75% in the form of cash sales (Table 5.3). The cash component of total income is up from 70% last year (this is due to higher income from fruit trees).

Gross profit is 80% of gross income for the cash component and 20% of gross income for the non-cash component of profit (Figure 5.4).

Net profit (after tax and interest) is only a little less than gross profit because tax and interest payments are relatively small items of expenditure (Figure 5.4). A significant proportion of net profit, on a total worth basis, is in a non-cash form (production consumed on the farm by the farm household).

Across all farms, the cash component of net farm surplus and net household surplus are positive. Farms generate a cash surplus but off-farm income (net of off-farm expenses) contributes substantially to net household cash surplus. Across all farms, net cash farm surplus is 2378 Yuan (up from 432 Yuan last year) before allowing for off-farm income and expenditure.

Significantly, off-farm income (net of off-farm expenses) is 1513 Yuan per household or equivalent to 62% of total cash living expenditure. Off-farm income contributes significantly to a net cash household surplus of 3891 Yuan per household (up from 1734 Yuan last year), before new borrowing.

Because non-cash production is similar to non-cash consumption, the total worth for net farm surplus and net household surplus are about the same as the cash figures (Table 5.3).

Net profit per adult labour unit and net household surplus per adult equivalent

On average, there were 2.28 adult labour units working on the average farm in 2000 and the farm supported 3.36 adult equivalents. The average Net Profit per adult labour unit was 2831 Yuan for the year. Net Household Surplus per adult equivalent supported by the farm was 1106 Yuan or 1070 Yuan per person.

Apple variety and tree crop enterprise budgets (2000 - mean over yielding orchards)

The price for Fuji apples is significantly higher (1.24 Yuan/kg) than most other varieties. By contrast, New Red Star fetched 1.02 Yuan per kg, Guoguang 0.50 Yuan/kg and John O’Gold 0.84 Yuan/kg. Fuji is also the highest yielding apple variety. Most farmers grow Fuji; 46 or 77% of monitored farmers grow Fuji whereas only 17 or 28% grow New Red Star, the next most popular variety.

Because of the high yield and high price, Fuji also has the highest gross margin. Gross margin for John O’Gold apples is a little lower than Fuji (1615 Yuan compared to 2013 Yuan for Fuji) mainly due to the lower operating expenditure on John O’Gold - however, this comparison is between a large number of Fuji growers and a small number of John O’Gold growers, who have mature trees (Table 5.4).

Based on the available labour requirement data, Fuji is the most profitable apple variety per labour day, followed by John O’Gold, and New Red Star. High harvesting labour requirements and a low price make Guoguang the least profitable apple variety per labour day.

Of the other tree crops grown on farms, chestnuts appear to be very profitable. Although the income per mu is lower for chestnuts than for the more profitable apple varieties they require less direct crop expenditure and the price per kilogram for chestnuts is five times greater than that for Fuji. Furthermore, the lower labour requirements for chestnuts make them the more profitable tree crop per labour day. However, our sample for chestnut growers is only 4 farmers who had only small areas in chestnuts.

Enterprise budgets for orchards at full production (6 years of age or more).

When analysis is based only on data for orchards 6 years or more of age (mature yielding orchards), Fuji is still the most profitable variety of apple with returns slightly ahead of mature John O’Gold. Guoguang is the least profitable with a gross margin per mu about a third of that of Fuji. The yield of Fuji on orchards with trees 6 years of age or more is 25% higher than the yield of Fuji averaged over all orchards regardless of age of trees (3608 kg/mu compared to 2890 kg per mu). On older orchards, John O’Gold is almost as profitable per labour day as Fuji (but the number of John O’Gold growers is small; only 3 farmers grow John O’Gold and have orchards with trees 6 years of age or more – so this may be an unreliable comparison).

Half the growers of Fuji, in the monitor sample, have trees 6 years of age or older (Table 5.5).

Although there are 2 monitor farmers with peaches 6 years or more of age, the data suggests that peaches may be more profitable than many of the apple varieties (table 5.5).

Enterprise budgets for mono cropping (2000)

The most commonly grown field crops are wheat, peanuts, maize, sweet potato and soya beans.

The most profitable of these crops in 2000 is peanuts (gross margin 475 ¥ per mu) followed by soya beans (GM 419 ¥ per mu), sweet potato (GM 358 ¥ per mu), maize (GM 252 ¥ per mu) and wheat (GM 225 ¥ per mu) (Table 5.6).

On a cash basis, peanuts are the major cash crop grown primarily for sale in the market. The cash gross margin from peanuts is 274 ¥ per mu compared to 59 ¥ per mu for soya beans and negative cash gross margins for maize, sweet potato and wheat.

Maize, soybean, sweet potato and wheat are grown mainly for consumption on the farm by the household or by livestock.

Based on the labour data, it would appear that soyabean (returning 28 Yuan per labour day) give a better return to labour than other crops (including peanuts). The return per labour day for the less profitable field crops is around 12 Yuan per day, which is similar to the daily rural wage rate (Table 5.6).

Enterprise budgets for inter-cropping (2000)

There are three major inter-cropping systems. Sweet potato with soya beans, sweet potato with maize and maize with soya beans. The sweet potato/soya bean and maize/soya bean crops are grown primarily for the cash market (60% of gross income worth is from cash sales) with the sweet potato and maize being the crops sold in the cash market.

In contrast, sweet potato/maize is grown mainly for consumption on the farm (particularly by animals) with only about 17% (mainly sweet potato) being sold for cash (Table 5.7).

Based on a limited number of growers (only 2 growers of maize/soyabean), the most profitable per mu inter-crop system in 2000 was sweet potato with maize with a gross margin of 365 Yuan per mu. Maize/soyabean (Table 5.7) has a gross margin of 178 Yuan per mu, and the gross margin for sweet potato with soya beans is 148 Yuan per mu.

Summary of livestock gross margins (2000)

Because livestock are not grazed on an area of land developed for forage production, no per mu profitability figures can be calculated for livestock enterprises. In situations where livestock numbers are sufficient to form a herd or flock, it is usual to calculate a gross margin per breeding female or per standard stock unit; this allows the profitability of different enterprises to be compared. However, when numbers of animals are small, as is the case for farmers on the Wulian apple project, calculations of this type are not feasible. In this situation, the only way in which enterprises can be compared are per labour day or per dollar of investment capital. Whilst we present per enterprise and per labour day gross margins, the labour input figures are only best estimates.

Pigs and goats are enterprises carried mainly as a source of cash income, although pigs also utilise a significant amount of food crops grown on the farm. Buffalo are used as draught animals although, if they are females, they may produce cash income from the sale of progeny. Animal enterprises also produce animal manure that is valuable for cropping enterprises.

Pigs are the most significant cash livestock enterprise for Wulian farmers, 93% of farmers monitored have pigs. The gross income net of livestock valuation readjustment is 1300 Yuan, mostly from the cash sale of livestock (Table 5.8). By contrast chickens, ducks and geese are mainly carried for the domestic consumption, including eggs consumed on the farm (Table 5.8). Goats are mainly sold for cash income, although there is some farm household consumption.

Over 90% of farmers have pigs, 72% have chickens, 32% have goats and 17% have at least one buffalo.

The figures for ‘other direct inputs’ in the livestock budgets for pigs and buffalo are high because they include some byproducts such as maize stalk and wheat stalk for buffalo; and maize, sweet potato, sweet potato vine, soy bean cake for pigs (Appendix 4).

Total income by source of income disaggregated by project activity

On average, project farmers have gross farm incomes 40% higher than non-project farmers (Table 5.9).

Table 5.9: Gross Farm Income by Project Activity

Project activity / Total farm income
(cash and non-cash) / Percentage above non-project farmers
Grafters / 11699 / 37%
Improved management / 13736 / 60%
New planters / 11021 / 29%
Non-project farmers / 8565 / n.a.
All project farmers / 12031 / 40%

Total farm income is greatest for improved management (13736 Yuan), followed by grafters (11699 Yuan) and new planters, 11021 Yuan. Non-project farmers have a gross income of 8565 Yuan (Table 5.9).