Agri3 Fund

CHONGQING AGRICULTURAL CHAIN CORPORATION LTD – CHILLI PEPPER FARMING, CHINA

Key Facts

  • Investee: Chongqing Agricultural Chain Corporation Ltd (“CACC”)
  • Lender: Rabobank
  • Location: Chongqing municipality, China
  • Transaction size: CCY 70 million
  • Term: 3-year loan
  • Instrument: Pari passu guarantee
  • Guarantee exposure: 50% of loan value
  • Main activities: chili pepper farming, farmer engagement, agricultural inputs, smallholder training, new production facilities  

Investee background

Chongqing Agricultural Chain Corporation Limited (“CACC”), is a division of Chongqing Agricultural Production Material (Group) Co., Ltd (“CQNZ”), a large government-owned supplier of agricultural inputs. CACC mainly trades in agricultural inputs, comprising fertilizer (main product), pesticides and seeds which are sold both to local farmers and international companies. CACC’s activities consist of 3 main elements:

Buying fertilizers in bulk from Chinese suppliers and distributing to farmers in the Chongqing area.

Exporting fertilizers to international buyers by acting as an intermediary between Chinese state-owned suppliers and international buyers.

Supporting stability and development of Chongqing agricultural sector by maintaining strategic stocks and by developing programs to support local farmers.

Transaction description

In collaboration with village authorities, CACC has developed a project which provides:

seedlings

inputs (e.g. fertiliser and pesticides)

technical advice and training (e.g. on fertilizer application, soil fertility management and water management).

to smallholder farmers to grow and harvest chili pepper, which CACC will then purchase from those farmers at a guaranteed price.

This is expected to significantly improve farmer incomes.

Raise the productivity and volume of chili’s that the client can process (dry).

Support their sale into the provincial market.

  • Rabobank has provided a loan to CACC to source the farm inputs, invest in drying equipment and to sell – in-kind or on a pre-finance basis – the inputs to the local village committees or cooperatives (on behalf of the farmers) and after harvest purchase the final product.
  • CACC will work with partners to provide advisory services to farmers – including training on fertilizer application, soil fertility management and water management. The project will built on a pilot that was undertaken by CACC during 2019/20.
  • The AGRI3 Technical Assistance Facility (TAF) will also provide additional support to CACC to address and improve the E&S risks and impacts of the project.

Project activities and expected impacts

The project is targeted to reach 10~15 townships, 100~150 farmers’ specialized cooperatives. Up to 80,000 smallholders by 2023 and a total project area of approx. 6,500 ha.
Inputs including seeds and fertiliser to be provided to farmers.
Training is expected to be delivered at each project village, with at least five rounds of training in each project village over the next 3 years.
Technical advisory services will also be provided to farmers in order to improve practices, leading to improved productivity and reduction in the usage of water and fertilizer application.
Market access to be provided to farmers, with CACC purchasing chilis at a guaranteed price and selling onto an off-taker.
A drying facility will be developed in order to process chilis prior to sale.
The project is estimated to lead to incomes of RMB12,500 – 18,000 per annum vs current income of RMB 4,000 per annum.

Project KPIs

AGRI3 KPIs Transaction targets
Natural forest under management
for protection.
419 ha of area under permanent protection
plus 1,675 ha of legal reserve.
Area of Natural habitats under management for protection.
2,095 ha of voluntary additional natural reserve protected above Forest Code requirements.
Natural forest under management for restoration objectives.
Yet to be defined how many ha to be restored.
Area of degraded land rehabilitated.
4,187 ha of former pastureland renovated.
Agricultural area under sustainable management.
4,187 ha of new productive area under sustainable management.
Number of participant reporting increased income, which can be disaggregated by gender and local communities for reporting purposes.
Percentage of income increase to be determined and to be developed by external consultant with support from AGRI3.
Number of farmers trained in, and technology transferred for, best management practices in sustainable agriculture/forest protection.
Number of employees trained on production techniques. The specific target is not yet decided.