Summary of Key Points
Henan is the largest watermelon-producing province in China, with one out of every five watermelons coming from the region. This year, some areas (such as Kaifeng) have experienced a surplus of watermelons at low prices, with purchase prices dropping to just a few cents per pound; however, another area, Xiayi County, has seen stable market conditions due to its mature industrialization. The reasons for this include increased cultivation, sudden surges in production caused by weather, competition from other fruits, and the simultaneous release of watermelons from many small-scale growers. As a result, retail prices have also declined, with supermarket prices falling by about 20% year-on-year. Solutions to these issues lie in more rational farming practices, improved variety selection, better sales channels, and reduced logistics costs.
Who Is to Blame for the Surplus of Watermelons in Henan?
The surplus of watermelons in Henan this year is not due to a single factor but rather a combination of several problems:
1. Excessive Expansion: Last year, high watermelon prices encouraged farmers to expand their planting areas, leading to a significant increase in production (7% overall). However, the demand did not keep up, resulting in a supply that far exceeded demand.
2. Unfavorable Weather: This year’s hot weather led to rapid and abundant growth of watermelons, causing them to mature all at once and overwhelming the market.
3. Fierce Competition from Other Fruits: Summer fruits like peaches and grapes are also in abundance, diverting consumer demand away from watermelons.
4. Disadvantages of Small-Scale Farming: Many farmers in Kaifeng grow watermelons in open fields, with low investment and no organized marketing efforts, leaving them with little bargaining power and forced to sell at low prices.
Why Are Watermelons from Xiayi County Selling Well?
Despite being in Henan, the watermelons from Xiayi County are doing well due to their industrialization:
1. Advantages of Greenhouse Cultivation: Xiayi mainly uses greenhouses for watermelon cultivation. Although the initial investment is higher, the quality of the watermelons is better (more consistent in taste and appearance), and they hit the market earlier (starting in early April), avoiding the peak selling period. The initial purchase price is around 2.8 yuan per pound, much higher than the few cents in Kaifeng.
2. Well-Developed Sales Channels: The area has a professional network of agents and brokers that connect with wholesalers, supermarkets, and online platforms nationwide, ensuring smooth sales. For example, Xiayi’s watermelons are sold to major consumption areas like Beijing-Tianjin-Hebei and the Yangtze River Delta.
How Did Watermelon Prices Drop from Farm to Supermarket?
The low prices at the farm level directly affected the retail market:
1. Reduced Purchase Prices by Supermarkets: The purchase prices for watermelons at the source have dropped by 14% year-on-year at RT-Mart, and the retail price of certain varieties has dropped by 20% at Yonghui. Other supermarkets like Lianhua and Box馬 have also seen similar reductions.
2. Increased Sales: Despite the lower prices, watermelon sales at RT-Mart increased by more than 20% in June. With cheaper options available, more consumers bought watermelons.
3. Direct Procurement Savings: Supermarkets like RT-Mart and Box馬 purchase directly from the farms, eliminating middlemen and thus reducing costs, which they can pass on to consumers.
How Can We Prevent Surpluses and Ensure Profitability?
To address this issue, we need to focus on four key areas:
1. Rational Farming: Farmers should not blindly expand their planting areas based on last year’s prices but adjust them according to market demand.
2. Variety Improvement: There is a lack of small and medium-sized watermelon varieties in Henan; it is recommended to cultivate more suitable varieties for household consumption.
3. Expansion of Sales Channels: By combining online and offline sales (with online orders accounting for half of total sales), we can expand market reach, similar to Box馬’s approach.
4. Reduced Logistics Costs: The transportation costs for transporting watermelons from northern to southern regions are often higher than the cost of the watermelons themselves. Government subsidies for logistics could help alleviate these issues and improve efficiency.
By addressing these aspects, we can ensure that farmers make a profit while providing consumers with more affordable watermelon options, achieving a win-win situation for both producers and consumers.