In China, Farmers' Labor Bears Too Much Fruit

ALINGSHAN, China - On steep, terraced hillsides at the end of a muddy track here in southeastern China grow some of the world's finest litchis, walnut-sized fruit with pale, sweet flesh coveted by Chinese emperors and commoners alike for centuries.

Tang Dynasty poets extolled the fruit in the ninth century, when special couriers brought it to royal palaces. More recently, as industrialization and capitalism have lifted millions of Chinese out of poverty, litchis have become a fruit for the masses, and are shipped all over the world.

Yet in the last few years, litchi production has soared beyond anyone's expectations. Retail prices have crashed, from $4 to $7 a pound in the 1980's for the best-quality litchis and $25 a pound during a bad harvest in 1993 to just 75 cents a pound now. For the most widely grown variety, the lower-quality heiye, retail prices have collapsed to less than 12 cents for a little more than a pound.

The plight of the litchi industry shows both the promise and the pitfalls of China's remarkable economic growth and its shift to an awkward but dynamic mix of capitalism and state socialism in recent years. As in many industries, from television sets to washing machines and now to cars, early success by a few producers led to a flood of investment, overproduction and the evaporation of profits.

While business success often draws new competitors in Western countries, the effect is outsize in China.

Each state-owned bank branch tends to funnel huge loans at very low interest rates to investors in any industry that seems profitable, almost regardless of whether other lenders are doing the same, bankers said. And with a long tradition of news media censorship and a distrust of official pronouncements, business executives and peasants alike tend to barrel ahead, leery of believing admonitions against over-investment - until prices plunge.

Among litchi producers, the problem was not so much loans, though these played a role, but rather a kind of folk wisdom that litchi trees would always be a good investment for families' savings. Growing litchi trees has been a form of long-term investment for Guangdong Province peasants for centuries. If they had a little extra money and did not need every last possible sack of rice from their land each year to survive, they could plant a handful of litchi trees and wait a few years for them to mature into a more profitable crop.

Climbing incomes in the 1980's and early 1990's gave huge numbers of peasants this option and many took it, disregarding warnings from academic experts that a surplus would result.

Litchi production has risen almost tenfold in the last decade, to an estimated 1.5 million tons this year. The annual harvest is poised to climb as high as 2.5 million tons in the next few years as recently planted litchi trees grow ever larger.

"If the output goes up that high, it will be a disaster for the market," said H. B. Chen, a professor of horticulture specializing in litchi at South China Agricultural University in Guangzhou.

Zhao Jiqing, a barefoot, chain-smoking litchi farmer here with a cellphone strapped to his belt, concluded that the summer harvest would be huge and prices low after talking to farmers in areas where the crops mature earlier.

He sorrowfully pulled nearly three-quarters of the ripening fruit off his trees and destroyed it, so as to save the trees' energy for next year, when he hopes prices will be higher. "I'm kind of gambling that next year will be better," he said.

Yet next year, there will probably be even more litchis, as young trees all over southern China grow ever larger.

Mr. Zhao terraced the hillsides here himself with a backhoe six years ago, using profits from a small fish farm and orange orchard, then planted his nuomici and guiwei litchi trees. These are the highest-quality varieties, although also the hardest to grow.

After three years, the trees were three feet tall and producing five or six pounds of fruit apiece. After six years, the trees are expected to be double that height and would yield 35 pounds of fruit apiece if all the litchi were allowed to mature, Mr. Zhao said.

In another decade, his trees will be fully grown, more than 10 feet tall and each producing up to 170 pounds of litchis, swelling the oversupply.

The Chinese government has banned the planting of any more litchi trees, and banks have stopped lending to litchi farms. But the current glut is not only going to grow worse as more trees mature, but is also likely to last a long time.

Once a tree reaches full size, it can continue producing litchis for centuries, although the poundage does decrease somewhat with age. Detailed production records show that a few litchi trees in western Guangdong Province are 1,200 years old, and they are still bearing fruit, Professor Chen said.

This small town in the Pearl River delta and its neighbor, Dalang, are famous across China for producing the finest litchi, so Mr. Zhao has some hope of selling his crop. More desperate is the plight of farmers farther west, where the soil and weather are less suitable for nuomici and guiwei litchi and vast orchards of heiye litchi trees have been planted instead.

These trees, also known as black leaf litchis, bear fruit with a blackish-red peel, and the seed is so large that there is little flesh. The meager flesh is watery and nearly transparent, and has a weak flavor.

Yet because heiye litchi trees are the easiest to grow, production of them has risen the fastest as inexperienced farmers planted them in the greatest numbers through the 1990's.

Professor Chen said that he and other agricultural experts tried to warn farmers in the 1990's that they were planting too many litchi trees, but were largely ignored.

"The farmers were very difficult about listening to us," he said. "The prices were very high."

A lack of a futures markets for commodities in China has made it hard for farmers to foresee the long-term direction of prices. Some litchi growers associations now allow the trading of rights to future deliveries, but only up to six months ahead, and the availability of these trading rights comes too late to stop the soaring output now.

Litchis are hard to export because they spoil quickly. Modest quantities are shipped to the United States and other overseas markets by air, or by sea in refrigerated shipping containers. Because transportation becomes a big part of the cost in foreign markets, retail litchi prices have fallen little in the United States and elsewhere, so demand has risen only slowly.

Fresh litchis are something of an acquired taste in any case, as they are time-consuming to peel for the modest fruit they contain, especially in the case of heiye litchis. But litchis lose part of their flavor when canned, and demand for canned litchis is so weak that the canneries offer farmers far less than the retail price, said Chen Chenxi, the chairwoman of the nearby Dongguan Litchi Growers Association.

Growers are trying to open up new markets for their crops. Litchi farmers used to brew small batches of wine in their homes from their crops, but several commercial litchi wine factories have now been erected in Guangzhou and another one is planned near here. Growers are also talking to agribusinesses and restaurant chains about using litchis as a natural sweetener.

Yet the litchi, long a symbol of China, is in danger of becoming passé in its home country. A canned litchi-flavored drink sold across the nation for many years has been losing sales lately, as young people choose newer and more fashionable drinks, like Coca-Cola

For Mr. Zhao, the current litchi glut has only one silver lining: farmers can afford to eat some of their delicious crops.

Back in the 1980's, he recalled, "I used to look at litchis, they used to look so good, and I'd have to put them aside - I'd only choose the broken ones on the ground."

Now, he said, he eats only the best litchis, and as many of those as he wants.