For the first time since the Handover, the government has decided Hong Kong is going to spend taxpayer money to promote agriculture. As an industry, it needs to be viable, i.e. profitable, or else it is welfare. Alex Fok gets his hands dirty investigating the numbers behind local farming.
Even in agricultural powerhouses like Canada, Australia and Europe, governments provide massive subsidies to farming at all levels, with the possible exception of marijuana cultivation. The rise of Hong Kong’s agricultural industry as a going concern demands scrutiny by legislators and civil servants, lest this supposed kickstart for the industry becomes a hopeless harvest.
The Hong Kong Government’s new agricultural development policy, released late last year, including a controversial advanced farming Agricultural Park (Agri-Park), assumes that some day farming can provide a decent living for aspiring agriculturists. However, if farming is economically unviable, then it must have other motives for supporting farming that address other societal needs. Subsidising urban farmers, vote buying for the CE Nomination Committee, and ‘rebalancing the economy’ have all been mooted by critics and advocates.
The value of local agricultural output in 2014 was $830 million, with vegetable production accounting for $279 million, about 2% of local market share. Poultry and livestock productions accounted for $303 million and $248 million respectively. However, the government has been, since 2005 and 2006, buying out poultry and livestock (here, pigs) farms, respectively, under the Voluntary Surrender Scheme for Poultry and Pig Farms. If the Government sees a future in farming, it is crop production, not animal husbandry.
Economics of farming
Harbour Times investigated two mostly vegetable farms with sizable operations – for Hong Kong. Many are said to not be break-even. HT looks at two operations considered to be performing reasonably well. Mr Tony Ng Chi Chung (吳志忠) is the farm manager at Lohas Organic Farm in Sheung Shui (est 2008). The farm occupies some one hectare (ha) of land, about 2.5 acres or about 107,000 sq ft.
“at least 80% of farmers are renters and most of the landowners are private actors
Mr Ng claims that their average cost per month is at least HK$70,000, of which about 70% is comprised of wages for five employees. Other expenses include rents, costs for infrastructure and maintenance, seeds and logistics. The monthly revenue is also around HK$50,000 to HK$60,000. According to Ng, each farmer can handle 0.2 ha of land at most. The numbers suggest there is not much profit to be had.
“It is hard for a farm to make a profit in the first five years of so,” admits Mr Ng, “but the revenues are getting better over time, so we can hope that the balance sheet will look good in the coming years.”
“Since we are engaging in organic farming, the best way is of course to rear some chickens as well so that the organic cycle can be more complete while we can also earn more as a result. This is forbidden by the Government, albeit justifiably, because of environmental reasons.” Mr Ng adds.
Mr Wong Yuwing (黃如榮) from the AuLaw Organic Farm in Kam Tin which owns some 1.4 ha of land also tells of similar numbers. Mr Wong said he needs a monthly revenues of around $80,000 to $100,000 in order to break-even.
“And don’t think set-ups like canopies are cheap. Better ones can cost more than $40,000.” Mr Wong says.
Just a little help
There is a little Government assistance. According to the statistics provided by the Agriculture, Fisheries and Conservation Department (AFCD), there are three loan funds; namely the Kadoorie Agricultural Aid Loan Fund, the J.E. Joseph Trust Fund and the Vegetable Marketing Organisation Loan Fund. These funds provide low interest loans to farmers. In 2014, a total of $6.7 million of loans were granted to 73 farmers (avg $92,000). In 2013/2014, a further $44 million was dispensed from the Agricultural Development Fund to finance research and development projects.
In addition, the government provides support in the event of flooding – but not much. Ms Elite Kwok Tung Wah (郭同華), president of the company which owns the Lohas Organic Farm, said they only received $1,000 from the Government’s relief fund when part of the farm was once flooded by heavy rains.
“The HKSAR Government is investing a considerably high amount of money into the agricultural industry,” lawmaker Steven Ho Chun-yin (何俊賢) representing the Agriculture and Fisheries sector told HT, “but it has to put the money in the right place.”
The promised land – with rent
One of the reasons farmers are still able to make a living is that they are paying a cheap rent. Ms Kwok says that the Lohas Organic Farm is paying rents to three different landowners, costing them a total of around HK$65,000 per year for the one ha. of land.
Meanwhile, a major factor constraining the development of the city’s farming industry is the lack of a long term policy to ensure that farmers are protected from normal business activities of landowners. According to Mr Ho, at least 80% of farmers are renters and most of the landowners are private actors. Ms Kwok provides an excellent example as to how landowners drive farmers off their lands. The Lohas Organic Farm was originally located in a different site in Sheung Shui with an annual rent of $2,000. Later on, when the contract expired, they were asked for a rent of $10,000 per month. Of course, landowners would object to government controls as a de facto seizure of their property.
“A better solution may be for farmers to take the initiative
No long term
There are two factors working against long term investment needed for farming to have a chance to succeed. First, contract periods tend to be short while farming activities require long term investment. Farmers will have less incentive to invest in the lands since they are uncertain about the prospect of their lease.
Second, landowners can refuse to renew their contracts with farmers, or charge high prices. Once the farmers depart, the owner can leave the lands to lie fallow one year and then apply for change in land-use. They will do this if they expect an increase in land prices. They can then earn a healthy profit just by selling the land to developers or the Government. Economically, land in Hong Kong is worth much more for almost anything other than agriculture.
Government plans vs. community initiatives
Au Kwok-kuen (區國權) is a member of the Land Justice League, an activist group promoting agricultural development in the city. He argues that while disputes between farmers and landowners can be problematic, the Government cannot intervene as these are activities conducted under the Landlord and Tenant (Consolidation) Ordinance. He urges the Government to review regulations set by the Town Planning Board on the use of agricultural lands and to charge landowners with abandoned farmlands with a levy.
Au said the League does not have any plan to lobby the Government as of late.
Steven Ho, meanwhile, proposes introducing rent subsidies for farmers so that they can afford paying for higher prices set by landowners, who would in turn have more incentive to rent out the land, in effect a transfer of taxpayer funds from government to landowners.
“contract period tends to be short while farming activities are essentially a long term investment
A better solution may be for farmers to take the initiative. A few months ago, Mr Wong from AuLaw Organic Farm founded the Hong Kong Organic Association which formed a network of farmers, shops, restaurants and education and green institutions. More recently, it launched a communal agricultural park as an alternative to the Government’s Agri-Park, providing cheap agricultural land in Tai Kong Po Village in Kam Tin. Mr Wong is eyeing expansion to the second and third villages if the model pays off. He also came to a deal with a shopping mall to set up a farmers’ market so that they can sell their products directly, securing the margin that otherwise would have gone to distributors and retailers.
While advocates, from time to time, suggest there is an appetite for organic and locally produced goods, it is not clear that they will pay a premium that would make farming lucrative enough to enable farmers to pay market rents for land. Mr Wong is testing that hypothesis with his innovations.
It seems that the best case scenario sees farmers paying people low wages in remote locations for little return where they have a high likelihood of being ejected from their land on short notice. There is little incentive for long-term investment given the precarious rental situation and thin (if any) margins. Mr Wong is seeking to bring producers together to improve profitability on the post-harvest end of the business.
If the government is aiming to create a sustainable industry that doesn’t require constant injections of funds to keep it going, it is unclear how its measures will help. Innovative farmers are taking matters into their own hands and will likely determine the future of their industry, whether it flourish or fail.