Monday, September 9, 2019

China's Large Farmers Abandon Land

China's new scaled-up farmers are losing money and abandoning rented land, according to recent reports from Chinese journalists. Liaowang reported that rice farmers in Fujian and Hunan Provinces lost money every year and cut back on leased land or switched to growing turf, tea, bamboo, or nursery crops. Another Liaowang piece reported on the same problem in northern provinces Shandong, Heilongjiang, and Henan. Economic Reference News interviewed farmers and village and provincial officials in Anhui Province and found that many "large grain farmers" (产粮大户) who lost money growing wheat on land leased from village collectives have tried to renegotiate multiyear land rental contracts, cut back on land rentals, or simply ran off and disappeared when they were unable to make ends meet.

Both articles said declining grain prices and rising costs and inability to mitigate risks from bad weather make farming unprofitable for large-scale farmers. Most of China's farmers are small-scale producers who cultivate small plots of 1 or 2 acres allocated to them by village collectives using mainly their own labor. Large-scale farmers rent consolidated plots of dozens or hundreds of acres and pay rent to collectives who pay out dividends to villagers. Farms also often hire villagers as laborers and pay them wages. While traditional small-scale farmers have modest cash expenses, the large-scale farmers have rent and wage obligations that must be paid in good years and bad.
An actively cultivated rice field on the left and an idle field on the right.
These land-leasing arrangements are often depicted by officials as a panacea for scaling up farming in a way that benefits both the farm producers and villagers who receive rent and wages. However, Economic Reference News emphasizes the high cost of rents. A farmer in northern Anhui who said he rents 300 mu (about 49 acres) at an exorbitant 1000 yuan/mu ($865 per acre) to grow winter wheat followed by summer corn. The wheat price has fallen from 2400 yuan/metric ton in 2013 to 1600 yuan this year, but the village collective that "owns" the land won't accept a reduction in rent. He wants to give back 160 mu.

Another farmer in Chuzhou prefecture lost money three years in a row growing rice and wheat on 710 mu (117 acres) of rented land and wants to cut back to 530 mu this year.

Rents are very high in many places. An Anhui Province survey in three districts earlier this year found averages of 1,200 yuan/mu in Hefei, 1,000 yuan in Bangbu, and 1,400 yuan in Fengyang.

One farmer reportedly ran off and left rice unharvested on 300 mu, with unpaid bills for rent, fertilizer and pesticide.

A farmer explained that the wheat from 1 mu can be sold for 800 yuan in a "normal" year. Production costs of 500 yuan and rent of 200 yuan ($173 per acre) leaves a net return of 100 yuan per mu--in a normal year. However, last year he was able to sell his wheat for just 500 yuan and this year 600 yuan, so he lost money on every mu of land he planted in each of the last two years.

An official in Anhui's Tianchang district says local policy encourages farmland transfers, and 61.7 percent of the cropland in this district has been transferred to large farmers. He also said that large farmers have lost money since 2016 and acknowledges that problems of land abandonment and disappearing farmers are common.

In Hunan Province, a large-scale rice farmer said he cut back from 1500 mu last year to 1200 mu this year. He claims to belong to a WeChat group of large rice growers--including one with a national reputation--that are all cutting back on their land rentals.

The problems are causing discord in the countryside. A farmer in northern Anhui said villagers gathered to block a wheat combine from harvesting 1000 mu she rented from their collective. The farmer said she hadn't been able to make any money since 2014 and lost her entire crop last year due to heavy rains. She said villagers, fertilizer dealers, and bill collectors all came to the field trying to collect her 2 million yuan in debt and unpaid bills.

[Anhui did have heavy rains at harvest time in 2018 that severely damaged the quality of its wheat; this year a bigger harvest depressed the price.]

Officials in several districts of Anhui said land abandonment by large farmers led to "conflicts", including villagers petitioning for "justice" to collect unpaid land rents. Township and village officials complain that the problem falls into their laps when large farmers run off without paying their rent.

Liaowang worried about degradation of soil fertility when large-scale rice growers shift their land to growing turf, tea, bamboo, and nursery crops. These crops use fertilizer and other chemicals more intensively than grains, tend to cause hardening of the soil, and each crop of turn harvested removes a layer of soil with it and carries it away.

Liaowang claims abandonment of grain land and requisitions of land for development are not captured by grain statistics because local authorities fudge their reports to higher-level authorities and there are no local land management officials to verify the statistics. Some land has been reported separately by agricultural and forestry officials as being planted in both grain and tree crops. Many localities kept their grain land nominally constant by declaring land on mountainsides as new farmland.

It's common for Chinese entrepreneurs to jump from one kind of business to another. Many took up farming after making money in construction, real estate, trucking or other businesses. One official criticized the large-scale "farmers" for plunging into agriculture to take advantage of government "awards" that were not enough to make the business profitable. Without much experience in farming, they moved on after losing money.

The nurture of a new generation of scaled-up farmers is a key component of plans to "modernize" Chinese agriculture. The National Bureau of Statistics recently noted the vitality brought to agriculture by new-type farm operators as an achievement to be celebrated on the country's 70th anniversary. Two years ago, the Ministry of Agriculture and Rural affairs aimed to have a supporting policy system in place by 2020, but this article suggests that the policies are not in place yet.

Very similar reports of difficulties faced by large-scale grain farmers circulated several years ago and also called for more and better subsidies. Three years ago, the Ministry of Agriculture introduced regulations for farmland transfers to prevent practices that "violate farmers' rights" and threaten "harmonious society", such as corrupt backroom land deals and shifting of land from grains to nongrain crops.

The reporters blamed falling rice prices, rising fertilizer prices, lack of irrigation and drainage facilities, lack of farm credit, and restrictions on land use that prevent large farmers from building worker dormitories, grain drying units, and sheds to store machinery. Economic Reference News calls for even more spending on construction of "high standard agricultural fields"--already China's largest agricultural expenditure, more availability of special insurance products like income and production cost insurance, expansion of provincial government loan guarantees, mechanisms to approve changes in land use, and mechanisms to prepay rent that would discourage "large farmers" from running off with bills unpaid.

A commentary on the phenomenon asks how land abandonment can be happening with more and more subsidies for agriculture but nevertheless recommends even more subsidies. However, the commentary concludes by insisting that "relying on subsidies isn't enough" but doesn't offer a clear solution.

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