Sunday, April 28, 2013

Rising Rents Restrain Family Farm Trend

An article this month described difficulties restraining land transfer and formation of family farms in Taizhou, a prosperous district of coastal Zhejiang Province that has been on the leading edge of China's land rental, large farm and village cooperative arrangements for a number of years. Local officials say about 40 percent of the farmland has been transferred here, higher than the national average of about 25 percent. However, farmers in Taizhou are discovering the age-old tendency for land rents to rise and eat up farm profits.

Yang Dengcong, chairman of a machinery services cooperative, rents 650 mu (107 acres) of land where he plants early-season rice followed by broccoli. He now pays 1310 yuan per mu in rent (about $1260 per acre), and rent was increased this year by 100-to-200 yuan per mu (an increase of about 100-to-200 dollars per acre). However, the broccoli market collapsed this year due to oversupply and farmers are now losing money on broccoli. Yet he has to pay even higher rent.

Farmers pay higher rents for higher-value crops. In Huangyan district of Taizhou, the general land rent is 800 yuan/mu but farmers planting melons pay as much as 1950 yuan/mu. Farmers compete for flat, fertile land, driving rents higher. No one wants land on hillsides because there are wild animals who eat the crops and machinery can't be used on hillsides or terraced fields.

Zhejiang and a number of other localities in China have subsidies or "awards" to large farmers to help offset the cost of renting land. One farmer describes his 30 yuan/mu "award" as a "drop in the bucket", considering that his rent increased by 300 yuan/mu this year.

In Taizhou, family land-holdings average 1 mu (6 mu = 1 acre), so you have to rent from large numbers of families to form a reasonably-sized farming operation. Plots of land are scattered and fragmented, adding to the complexity and transaction costs.

Land rental contracts are nearly always short-term. One reason is the worry that rent will rise next year.

According to Taizhou officials, another reason for short-term rentals is that farmers want the flexibility to abandon their enterprise when it goes into a downturn and they start losing money.

Chinese entrepreneurs--farmers included--have a go-go make-money-today-or-move-on-to-the-next-thing mentality which clashes with agriculture's fundamental character as a long-term investment requiring patience.
The system discourages investments in land and good stewardship, undermining any hope of sustained improvement in agricultural productivity--and food security.

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