Xingtai, Hebei — Looking at the newly built road lined on both sides with walnut trees, Li Hejun felt satisfied: He’d eventually found a way to sell agricultural produce online, even though that success has given him many sleepless nights.

Li, 33, a resident of Nanjiushui village in Xingtai county of Hebei province, about 500 kilometers from Beijing, has described his relationship with Liu Shuwei, an economics professor and researcher at the Central University of Finance and Economics, as being like that between a mother and son.

That’s because Liu taught him to use the Internet and employ modern marketing methods to sell the agricultural produce of his village. Liu’s intervention has helped Li to lead a life far removed from that of many other young farmers.

In May, Liu placed a post on her micro blog on t.163, a major Chinese micro-blogging website, saying that she wanted to help the people of Nanjiushui sell their produce and raise funds to build a road that would connect walnut groves in a mountainous area with the village center.

She soon received orders from across the country, with the exceptions of Qinghai, Tibet, Xinjiang and Ningxia, where online shopping isn’t as popular as in other areas.

Meanwhile, she helped Li to open Nanjiushui’s official micro blog and started posting photos of the walnuts trees and the road, which was then under construction, to share with other bloggers and customers.

Liu bought a computer and a camera for Li, enabling him to take photos and to go online. Their combined efforts attracted hundreds of orders for the walnuts.

“At the very beginning, we promoted the walnuts and I even called my friends to place orders,” said Liu. “As the orders started to increase, I started worrying that the village would not have enough to meet demand.”

In October, when the walnuts had matured, Li organized other villagers to pick those of the best-quality and to package them with the help of staff from a logistics company, Shanghai Yuantong Express (Logistics) Co Ltd, which also tendered the lowest price for delivery of the produce.

After a hectic month, Nanjiushui had sold 2,500 kilograms of walnuts, making a net profit of 50,000 yuan ($7,900).

Liu said this first attempt has demonstrated that China’s agricultural sector needs to be reformed in terms of marketing, organization and talent. Previously villagers have not received enough help from effective organizations to market and transport their wares, a situation which may change with the introduction of the new methods.

Modern marketing

“The boom in electronic commerce will change the marketing mode for agricultural products and accelerate the development of the sector,” said Liu.

In 2010, the prices of garlic, ginger, cotton and potatoes reached record highs. However, in the following year, many agricultural products such as Chinese cabbages in the provinces of Shandong and Zhejiang, carrots in Jiangsu, bananas in Hainan and potatoes in the Inner Mongolia autonomous region all faced a poor market.

The record high prices were caused by manipulation of the market. The following year’s poor market was caused by “blind planting”: when farmers get a good return from a certain plant one year, many will plant it again the following year, leading to oversupply in the market and a loss of earnings.

The price of Chinese cabbage in Shandong dropped as low as 0.2 yuan per kilogram, according to market statistics.

The slack market for agricultural produce was not purely result of oversupply, according to Liu’s analysis.

“Traditional small-scale farming by individual owners cannot meet the needs of a modern society. That has led to an imbalance in the demand and supply of agricultural products.”

Traditionally, the market process for agricultural product sales in China is very simple: family-based production units sell the produce to wholesalers and the wholesalers sell them on to retailers.

The farmers’ choice of crops is largely dependent on the previous year’s prices of agricultural products, which adds the aforementioned “blindness” to the choice of crops sown.

Moreover, the quality of the products is not directly related to the reputation of specific farmers, because consumers buy them from the retailers instead of individual growers. In other words, the quality of the products in one year will not affect profits the next, a state of affairs that fails to motivate farmers to produce better goods.

“The use of online marketing means customers have access to information and the photos on the micro blog about the produce they have ordered. That helps to build trust between farmers and the buyers,” Liu said. “It also avoids price manipulation by traders, because farmers and customers are directly linked. They can communicate online.”

“We have sold fewer walnuts than last year and selling them online is a little troublesome, but we make more money by doing this than by selling them to the traders as before,” said Li Quan, 65, one of the village heads of Nanjiushui, and the father of Li Hejun.

He said his son endured many sleepless nights because of wet weather during the October harvest period.

Usually, the walnuts need to be put under the blazing sun for two to three days immediately after they are harvested to accentuate the flavor. However, people in Nanjiushui didn’t have good luck because of the inclement weather in 2011.

They had planned to sell 15,000 kilograms of walnuts, but eventually only managed to pick 5,000 kilograms of produce that was of sufficiently good quality. “During that period, I prayed every night that the next day would be sunny,” said Li. “Because I am the person operating the micro blog, I have a responsibility to ensure the quality of the produce.”

Many micro-bloggers told Li that they didn’t care about the quality of the walnuts because they saw their purchases as a charitable move to help the villagers build the much-needed road. However, Li refused their offers and refunded two-thirds of the orders.

Li said the reputation of Nanjiushui’s agricultural produce will not be affected by these events.

“In the future, we are going to sell dried persimmons and chestnuts through the micro blog,” he said. “We should provide customers with the best-quality food.”

According to Liu’s research, when the reputations of farmers influence their future profits, they will have stronger motivation to provide better-quality goods.

Modern agricultural production methods will be fully embraced when groups such as the Nanjiushui farmers can develop their own brands and continue to prosper.

Logistics gap

“We don’t profit from this deal, but we want to keep our promise to the villagers,” said Hao Yanguo, the marketing manager of Yuantong Express, when asked about the distribution of the walnuts grown in Nanjiushui.

He said that, with the exception of Worldwide Express Mail Service, China’s national express service provider, it is the first time that a Chinese logistics company has come to remote mountain areas to deliver food products. Previously, logistics companies would not visit such a remote place because of the difficult transport conditions and high costs.

To help the villagers, the company offered a price one yuan lower than usual for distribution of each kilogram.

“The company is planning to move a big part of our business into delivery services for agricultural products,” he said. “We are still at the exploratory stage, looking for a mode mature enough to help the farmers and ensure our profits at the same time.”

Wang Jinlong, vice-president of Yuantong Express, said logistics companies should take the responsibility of connecting farmers with consumers, to help them sell their produce at a better price and increase earnings.

Although the company has offered the lowest price, logistical costs still account for 20 percent of the total income from Nanjiushui’s walnuts sales.

Fang Li, the district manager in charge of business in the region where Nanjiushui is situated, said the cost of gasoline accounts for half of the total logistics cost and road tolls take up 20 percent of that figure.

She said it is unclear at present how the government will provide subsidies for logistics services for agriculture products.

“There is no formal regulation of the sector,” she said. “The only thing the company can do is try to reduce costs during the operation.”

Logistics services for agricultural products are different from those for other goods because the company has to transport large quantities of produce from the point of origin simultaneously to ensure freshness.

“Traditional logistics services are still unable to meet the demand for online agricultural marketing,” said Liu. “To some extent, it has limited the rapid development of electronic commerce for agricultural products.”

In recent years, many agricultural products have been sold online, especially on Taobao, a major shopping website. Meanwhile, many local governments have opened trading websites for farmers in their regions.

The online sale of fruit, chickens and grains is no longer a rarity in China.

Instances of online marketing of agricultural products will definitely increase in the near future, which will lead to soaring demand for the corresponding logistics services. Thus, the reduction of the costs of those services for agricultural products is key for expansion of the business, Liu said.

“The new agricultural marketing and related delivery services are significant in a country where farmers comprise more than half of the population,” she added.

Attracting talent back

Of the 253 current residents of Nanjiushui, only two, Li and An Delin, have received a high school education and An is more than 40 years of age. Most of the young people have left the village and now work in cities. The women and the elderly who stayed in the village have become the main force in local farming.

“It is hard to persuade them to accept advanced farming technologies and modern marketing concepts,” said Li.

“Seeing friends of my own age leaving and making a lot of money, sometimes I also had the urge to move out,” Li said. “However, after I learned to use a camera and the micro blog and organized my fellow villagers to sell walnuts online at a profit, some of my friends told me that they wanted to come back to help, so long as they could also make money.”

Urbanization, the movement of large swathes of country people to cities and employment in the secondary and tertiary industries, has resulted in the nation’s rural population falling from 82.08 percent in 1978 to 50.32 percent in 2010.

According to statistics from the Chinese Academy of Social Sciences, 2011 saw the country’s urban population overtake the rural for the first time.

Liu said that attracting  highly educated young people back to the villages is the key to solving the talent shortage in agriculture development.

More than 30 people in Nanjiushui received a high school education, but only two have stayed in the village. Liu believes that modern methods of agricultural production and marketing will attract them back when they can see their value being realized on the rural stage.

Sun Yanqing and his wife, Meng Hexiang, were both born in the village but left to work in a coal mine a number of years ago. However, this year they decided to return.

Sun said that if they can plant walnut trees and other produce more efficiently, they will be able to earn as much money as they could by working in the city.

Meng Hexiang said there is more freedom in working at home and it means she can spend more time with their children.

“The terrible condition of the road and the poor market used to be big problems,” she said. “Now the new road is completed and we have found a new way to sell our produce, we feel that both business and life will be much easier than before.”