Declining Net Returns from Grain Farming: Who Will Grow the Grain Concerns National Food Security

For a long time, “who will grow the grain” has been an extremely important topic, since it concerns national food security. But it also seems not to be a problem, because as long as grain farming is worthwhile, someone will naturally grow it. So “who will grow the grain” ultimately comes down to how to ensure that grain farming is profitable, yet the grim reality is truly worrying.

Net returns are declining

The net return per mu from grain farming depends on grain yield per unit area, grain prices and the cost of grain farming. In recent years, with the implementation of national policies to support, benefit and strengthen agriculture, grain production infrastructure has been greatly improved, the capacity for agricultural disaster prevention and mitigation has been enhanced, the contribution rate of agricultural science and technology and the adoption rate of improved varieties have increased year by year, and grain yield per unit area has risen. In 2014, the national grain yield per unit area was 8.3% higher than in 2010. At the same time, the state raised grain purchase prices year after year; from 2004 to 2015, the minimum purchase prices for rice and wheat rose by about 6% annually on average, ensuring that grain prices generally maintained a steady upward trend. The combined effect of higher grain yield per unit area and higher prices ensured growth in total income from grain farming. In 2013, the total income per mu from rice and wheat was 1305.90 yuan and 901.93 yuan respectively, 21.3% and 20.1% higher than the total income per mu from rice and wheat in 2010. However, total grain farming costs grew even faster. In 2013, the planting cost per mu for rice and wheat was 1151.11 yuan and 914.71 yuan respectively, 50.2% and 47.9% higher than the planting cost per mu for rice and wheat in 2010. The result was that net returns from grain farming declined year by year. In 2013, the net return per mu for rice was only 154.79 yuan, less than half the net return per mu in 2010; in 2013, wheat even recorded a loss in net return per mu for the first time, 144.95 yuan lower than the net return per mu in 2010.

⟦NL> Viewed from the current situation and future trends, China's grain yield per unit area has already reached a historic high and relies excessively on inputs such as chemical fertilizers and pesticides. Soil quality decline of varying degrees has appeared in many regions, making future increases in grain yield per unit area increasingly difficult. Domestic grain price increases have also encountered the “ceiling effect” of foreign grain prices. Taking staple grains as an example, after 2012 the domestic price of indica rice generally began to exceed that of Thai rice, while rice prices in Vietnam, Pakistan, India and other countries were even lower. Starting in April 2013, it became the norm for the landed duty-paid price of US wheat to be lower than the transaction price of medium wheat in Zhengzhou. The inversion of domestic and foreign grain prices means there is limited room for domestic grain prices to continue rising; an excessively large price gap can easily lead to large inflows of imported grain through various channels, and in recent years the trend of a sharp increase in grain imports has already begun to emerge. In the future, the growth momentum of total returns per mu from grain will inevitably be restrained.

What is unsettling is that the cost of grain farming may continue to rise. In recent years, the scale of land transfer in China has increased year by year. At present, the land transfer rate has reached about 30%, and the rent for transferred land generally reaches more than 500 yuan per mu per year, even reaching about 2000 yuan per mu per year in suburban areas, causing land costs to become explicit and greatly increasing the total cost of cultivation. Moreover, the cost of agricultural labor has gradually become equal to urban labor costs; at present, the national daily wage for agricultural production labor is generally about 100 yuan. Therefore, new agricultural operators that need to rent land and hire labor have even lower net returns per mu from grain farming, and grain farming in suburban areas is basically at a loss. In the future, rising land rents and labor costs will only intensify the phenomenon of large-scale operators growing less grain or not growing grain at all.

⟦NL> Relative returns are also relatively low

⟦NL> Compared with grain farming, growing cash crops yields higher returns. In 2013, the national average net profit per mu for the three main grains (rice, wheat and corn) was 72.94 yuan, with a cost-profit ratio of 7.1%, while the average profit per mu for vegetables in areas around large and medium-sized cities was 2852.27 yuan, 39.1 times the net profit of the three main grains, and the cost-profit ratio was as high as 70.4%. Moreover, vegetables can be grown in open fields or in protected facilities; the latter requires greater investment but yields higher profit per mu. This is also why transferred land in suburban areas of large and medium-sized cities is basically all used for growing high-profit cash crops such as vegetables, flowers and nursery stock.

⟦NL> Compared with farming, working away from home yields higher returns. In 2013, the per capita wage income of rural residents nationwide exceeded household operating income for the first time; this result includes income data from a large number of farmers who work part-time, mainly locally. If only the income of migrant workers is calculated, the per capita monthly income of migrant workers in 2013 was 2609 yuan; even calculating on the basis of 10 effective working months per year, the annual income reached 26090 yuan, 6.9 times the per capita household operating income of farmers in the same year. The relatively high returns from working away from home directly cause young and middle-aged people and high-quality farmers in rural areas to move to urban areas. In 2013, migrant workers under 50 years old accounted for as much as 84.8%, and those with junior middle school education or above accounted for 83.4%. The remaining rural labor force is mostly women, children and the elderly, with relatively low educational quality, and cannot adapt to modern grain farming methods and advanced production technologies.

⟦NL> Stabilize the mechanism for grain farming returns

⟦NL> The advantage of stable grain farming returns must be maintained. At present, one major reason why the grain planting area has not seen a cliff-like decline is that the state adopts a purchase and storage policy for grain, and grain prices are relatively stable. For producers who dislike risk, stable grain farming returns still have relatively high appeal. Therefore, in the future efforts should focus on building a mechanism to stabilize grain farming returns, improving the grain purchase and storage policy, and raising the coverage rate and claims standards of policy-based insurance for grain crops.

⟦NL> In the short term, it must be ensured that small farmers do not lose money growing grain. Another major reason why China's grain planting area will not decline sharply in the short term is that grain farming entities are mostly small farmers. The advantage of small farmers growing grain lies in the fact that they cultivate land allocated free of charge, do not count labor input, and grain production is highly mechanized; in addition, with their distinctive “attachment to the land”, as long as there is income after deducting agricultural input and machinery costs, it can basically be ensured that land will not be left abandoned on a large scale. For this reason, grain farming subsidies for small farmers must not be canceled; moreover, those who actually grow grain should receive more subsidies, and pressure on farmers' grain farming costs should be eased through agricultural production services and agricultural input subsidies.

⟦NL> In the medium and long term, the enthusiasm of large-scale operating entities for growing grain must be ensured. It can be foreseen that, with the natural replacement of the rural population in the future, the main force of grain farming represented by dispersed middle-aged and elderly farmers will gradually shrink, and large-scale operating entities represented by farmers' professional cooperatives, family farms, large growers and agricultural enterprises will play the role of a new force in grain farming. Given the persistently high cost of renting land, it is unrealistic to expect grain farming in suburban areas, so on the one hand it is necessary to strictly limit the land use in major grain-producing areas and stimulate the enthusiasm of grain-producing areas through benefit compensation; on the other hand it is necessary to build a policy support system for large-scale grain farming entities, covering financing services, agricultural infrastructure construction, agricultural technology innovation and extension, agricultural socialized services, agricultural insurance protection, etc., and establish a target income subsidy system for grain farming for large-scale operating entities.

⟦NL>