Farm consolidation has become an ongoing issue in China. The No. 1 Central Document for 2014 released jointly in January by the Central Committee of the Chinese Communist Party and the Chinese government’s State Council established goals to modernize and industrialize Chinese agricultural production and facilitate the steady movement of rural people to cities, while protecting the nation’s food security.
Deep in the details of the document were goals to make greater efforts to support agricultural insurance, develop various kinds of scale management, speed up the development of the modern seed industry and agricultural mechanization, strengthen the building of the market system for agricultural products and promote and speed up the urbanization of the population transferred from agriculture. This was to be done while ensuring that the farmland area will not decrease, the quality of farmland will improve and agricultural production capacity should be continuously increased to insure food security. These statements should be taken as desired outcomes of policies, not immediate action points. They do provide a general framework for policy discussions.
The 15-page document makes clear that these are to be made within the current system of government management of agriculture, but recognizes that people will be transferred out of agriculture. After decades of trying to prevent the movement of people from rural to urban areas, the government is recognizing the use of modern technology requires larger farms and many farmers have land areas too small to allow them to earn incomes that move them above subsistence incomes. Change will likely come slowly, but the process has begun.
Not all of Chinese agriculture is at the same point in terms of consolidation. A recent report by the Foreign Agricultural Service (FAS) of USDA on Northeast China noted that most agricultural production comes from farms of less than two acres, but in the province of Heilongjiang a number of large scale state farms still exist and account for approximately one third of crop production. Over 80 percent of the country’s imports of large combines come in through the custom district of Dalian in Liaoning province. Efforts to encourage farm consolidation and larger scale production are underway in all three provinces, most notably in Heilongjiang. The Northeast accounts for 40 percent of China’s soybean production, 35 percent of its corn output, and 30-50 percent of the japonica rice crop.
A recent story in South China Morning Post newspaper reported that China’s Ministry of Agriculture had taken over 1,700 farms and 3,200 agricultural companies, including seed distribution. Similar consolidations of smaller businesses into state-owned enterprises have previously occurred to promote large-scale agribusiness.
Segments of Chinese agriculture are at different degrees of concentration. Though the changes are hard to quantify, swine and dairy production for more than a decade have been making the shift from small backyard operations to modern large scale farms. That is probably more than half done and maybe approaching two thirds done. The chicken broiler industry is similar, but the total industry has also grown. The debate on consolidation is mostly done for these commodities.
Most of the cotton is produced by 7.5 million growers with 0.5 hectares of cotton, but some cotton farmers are organized as much larger units and can use additional production aids like plastic film and drip irrigation. About 110 million farms grow rice and another 100 million grow corn. Wheat is grown by about 75 million farmers, most of whom grow one or more other crops. Soybeans are not part of the debate because most of the soybeans consumed are imported and that is not going to change.
The debate on consolidation is really about corn, rice and wheat. Corn is mostly used as feed for swine to produce 55 million tons of pork annually. An ample supply of pork is a measure of the standard of living and should not be overlooked as a food security issue. Rice and wheat are used for direct human consumption and are at the center of the consolidation debate.
The No. 1 Central Document provides some direction. Basic self-sufficiency of grain and absolute grain ration security are to be ensured under any policy. The international markets for agricultural products and international agricultural resources are to be used to effectively regulate and supplement domestic grain supply. This is taken by analysts in the U.S. to mean that wheat and rice import can be about 1.0 percent of annual consumption, with corn imports up to 5.0 percent in some years. China also directly imports pork, beef, dairy products and poultry meat when needed.
Wheat and corn farmers have one-third of a hectare and rice farmers a little more than one-fourth of a hectare. Even farmers with 2 or 3 crops cannot hope to efficiently use many newer technologies. The one exception to this rule is improved seeds and may be why the Chinese officials are interested in the development of the seed industry. Improved seeds are said to be size-of-farm neutral. Chinese and Indian cotton farmers proved that to be true with hybrid and biotech cotton seeds. Improved seeds may help to increase yields during this transition period.
There is no road map for how to make this transition. There is no history of property rights in China, but beginning in 2008 peasants could obtain use rights. There are many references to land use in the No. 1 Central Document, but it remains to be seen what that means in the context of the Chinese system. The political leaders recognize the need for change. There is no reason to delay.