Wheat, Corn and Other Grain Prices Are Falling: How Can the Plight of Grain Farming Be Solved?

         Falling grain prices have once again dampened farmers' enthusiasm for growing grain. They have also had a negative impact on land transfers and large-scale operations, with signs even emerging of contractors withdrawing from leased land

◆Report by Cao Fengqin of the Economic Herald, from Yanggu and Dongming

“1.15 yuan per jin, and I sold all of my more than 40,000 jin.” On the 23rd, farmer Xiu Yong of Yanggu County told the Economic Herald reporter that when the wheat had just been harvested, the market purchase price was still 1.18 yuan/jin. Considering that last year the wheat price had reached a high of 1.3 yuan/jin, he wanted to wait and see. But who would have thought that since entering August, the wheat purchase price had kept sliding, and in early October it even fell once to 1.07 yuan/jin. Although the market price has rebounded somewhat recently, it has been hovering between 1.13 yuan and 1.15 yuan/jin. “I saw industry insiders analyzing that the wheat market price may still fall further, so I did not dare wait any longer,” Xiu Yong said.

The Economic Herald reporter learned through interviews that low-priced bulk agricultural products from abroad have entered the domestic market, causing large stockpiles to accumulate and domestic agricultural product prices to hover at low levels. At the same time, China's labor costs have continued to climb, and farmers' scattered operations still remain the main model, keeping the production costs of agricultural products high.

Since the beginning of autumn this year, corn and wheat prices in major grain-producing areas have fallen to varying degrees. The decline in corn prices has been especially notable, with the largest drop reaching 40% compared with last year. Falling grain prices have once again dampened farmers' enthusiasm for growing grain. They have also had a negative impact on land transfers and large-scale operations, with signs even emerging of contractors withdrawing from leased land.

Willingness to Lease Land Declines

“When grain is cheap, the land is also hard to lease out.” Farmer Wu Fang of Gaomiaowang Township, Yanggu County, is already 67 years old this year. As he has grown older, he finds farming somewhat beyond his strength. He wanted to subcontract his land to others, but after asking many villagers, he found no one willing to take it on. “It used to be 1000 yuan per mu per year, and it was very easy to lease out.”

“It was still all right when grain prices were high, but now that grain prices are so low, leasing land is simply not profitable.” Xiu Yong told the Economic Herald reporter that although land transfers have been rolled out comprehensively and show a trend of deepening day by day, at present most of those leasing out land are households made up of “left-behind elderly people” and “left-behind children,” and there is still a considerable distance to go before large-scale transfers. Although the level of mechanization has continued to rise in recent years, the scattered land of farming households has created obstacles to uniformly changing the planting structure, keeping grain production technology and mechanization levels relatively low and production costs relatively high. “In a good year, you can make a profit for one season.”

According to data from the Liaocheng agricultural department, if family labor imputation and imputed rent on owned land are not taken into account, the average production cost of wheat this year was 421.89 yuan, up 4.91% year on year.

China's high inputs and high subsidies for grain farming appear on the surface to increase farmers' income, but in fact, including government subsidies, a large part of it is converted back into inputs for grain farming. After calculation, experts found that last year the net profit from one mu of wheat was 87 yuan. This year, with a bumper wheat harvest and a sharp drop in grain prices, although the yield per mu was higher than last year, the net income from one mu of wheat was only 33 yuan. If some natural disasters are encountered again, losing money on grain farming will become a high-probability event.

40-year-old grain farmer Wu Chunlai told the Economic Herald reporter that since 2007 he had successively contracted cultivated land from families in the village who went out to work, and now had seventy or eighty mu. Because it was too scattered, although grain prices had risen for years in a row, the returns were not very good. This year wheat prices fell, and corn even dropped from 1.3 yuan/jin last year to 0.83 yuan/jin. In addition, autumn corn lodged and could not be harvested mechanically, and hiring people added another expense. “It is roughly equivalent to working for nothing. When the term expires next year, I plan to return all the land.” Wu Chunlai calculated.

Large grain farmers feel even more as if they are in “deep water and scorching fire.” A large grain farmer who declined to be named told the Economic Herald reporter that many large grain farmers are currently struggling to keep going and operating at a loss. He believed that continuously falling prices and persistently high planting costs would inevitably dampen farmers' enthusiasm for growing grain over time. “Once the number of farmers leasing land decreases, the proportion of land transfers will decline somewhat, which is not conducive to the development of family farms and farmers' professional cooperatives that the state has consistently encouraged and supported.”

Low-Cost Cultivation Improves Efficiency

“At present, wheat, as one of China's main staple grains, must respond to international competition by reducing production costs and improving grain-growing efficiency.” Recently, at the wheat “two-deep, one-shallow” simplified cultivation technique training and autumn sowing field site held by the Shandong Academy of Agricultural Sciences in Matou Town, Dongming County, Wang Fahong, a post expert in the National Wheat Industry Technology System and a wheat cultivation expert at the Shandong Academy of Agricultural Sciences, told the Economic Herald reporter that the wheat “two-deep, one-shallow” simplified cultivation technique is precisely such a technology that both saves costs and improves efficiency.

This technique targets the current production situation in Shandong of relatively high seeding rates, widespread excessive fertilization (nitrogen fertilizer), overly frequent irrigation, and excessive mechanical operations. It is a high-yield, high-efficiency wheat cultivation technique innovatively integrated by the Crop Research Institute of the Shandong Academy of Agricultural Sciences. It completes multiple key steps in one pass, including rotary tillage of the seedling strip, vibrating subsoiling, layered deep application of fertilizer, uniform sowing at equal depth, and post-sowing compaction, saving labor and time.

“‘Two deep’ refers to subsoiling operations to break the plow pan and deep fertilization to improve fertilizer use efficiency, while ‘one shallow’ refers to appropriately shallow sowing to ensure wheat sowing quality and cultivate strong seedlings.” Wang Fahong explained that compared with traditional techniques, the “two-deep, one-shallow” simplified cultivation technique reduces mechanical operation costs by more than 70 yuan per mu, cuts the seeding rate by about half to 15 to 20 jin, and reduces fertilizer application by 15% to 20%. Moreover, subsoiling breaks the plow pan and improves the deep soil structure, which is conducive to root penetration. Layered deep application of base fertilizer improves fertilizer use efficiency, and wheat yield per mu can increase by about 10%.

Ma Guoxing, chairman of the Maifeng Wheat Planting Professional Cooperative in Dongming County, did a calculation for the Economic Herald reporter: adopting this cultivation technique not only saves costs, but also increases wheat output by more than 100 jin per mu, saving costs and improving efficiency by 200 yuan per mu. “In 2013, the cooperative set aside 100 mu for trials and earned more than 20,000 yuan extra in one season.” Ma Guoxing said that in 2014 he purchased 10 sets of matching new seeders and expanded the planting area to 13,000 mu, with obvious returns in the summer of this year. “For this year's autumn sowing, we plan to fully cover the cooperative's wheat planting with this technique, totaling more than 26,000 mu.”

Lu Bo, director of the Planting Industry Management Division of the Shandong Provincial Department of Agriculture, said that the wheat “two-deep, one-shallow” simplified cultivation technique effectively solves the problems of scattered household-by-household grain planting and high production costs, and is an innovation in Shandong's grain production methods.

The Liaocheng Price Bureau also recently released the "Liaocheng 2015 Wheat Cost and Benefit Survey," recommending increased financial support for agriculture, improved grain production conditions, and a stronger supporting role for science and technology in grain production; focusing on improving the direct subsidy system for grain farmers' income, subsidies for agricultural inputs, and market supervision systems, establishing an income security system for grain farmers, accelerating the promotion of crop insurance business, and ensuring farmers' enthusiasm for growing grain; in addition, further improving rural land transfer work, increasing support for large grain farmers, implementing scientific and unified land management, reducing costs, and raising production capacity.