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SHANGHAI - For Zhang Youhai, a 33-year-old pomelo grower in Meizhou, Guangdong province, one of his happiest memories of 2011 was having all his produce sold through the government's farmer-supermarket direct purchase program at an early negotiated price. Many other individual growers suffered from a fall in prices.
The Year of the Rabbit was good for pomelo growers in terms of output. The annual output of the citrus fruit in Meizhou was about 400,000 tons, an increase of 20 percent from 2010.
However, farmers' incomes did not rise alongside the growth in output. The increasing market supply and lower demand in the global market triggered competition among growers and the retail price went down significantly.
The price at the end of 2011 was about 2 yuan (32 cents) a kilogram, a drop of 50 percent from August 2011.
"We had good expectations for the market performance in August. We never expected the price to drop so significantly," said Zhang. "The growing cost for a kilo of pomelos is around 2 yuan. The price drop meant some pomelo growers earned nothing for the whole year of 2011."
Zhang, whose family has grown pomelos for more than 20 years, did not suffer from the competition thanks to the farmer-supermarket direct purchase plan, which allowed him to sell 75,000 kilos of pomelos at 3.64 yuan a kilo, much higher than the average prices.
Zhang said some of his pomelos are sold to consumers through global retailing giants' distribution channels including CP Lotus Supermarket, which is a subsidiary of Thailand-based Charoen Pokphand Group.
"I signed a contract to sell all my pomelos to a fruit trading company at a fixed price. The company acted as a channel in the direct purchase plan in Meizhou. They buy our pomelos and sell them to supermarkets. My task is to supply enough pomelos at the end of 2011 to fill the orders," said Zhang.
It was the first year Zhang had joined the direct purchase plan. In previous years he said he would have had to join in price wars either to sell his pomelos or lose out in poor market conditions.
"I think I will stick to this direct purchase plan because it provides us with a guarantee in all situations," added Zhang.