The neglected truths and logic of family farms in China

Family farms are a new type of operating entity that has emerged in China's agricultural production and operation in recent years. They use farmer households as the basic production unit, increase inputs of factors such as technology and capital, implement specialized agricultural production and scaled operation, raise agricultural output rates and the commercialization rate of agricultural products, and raise the level of agricultural mechanization and the intensity of agricultural operation.

The 2013 No. 1 Central Document proposed encouraging and supporting the transfer of contracted land to specialized large households, family farms, and farmer cooperatives, which became one of the highlights of agricultural development in recent years and, for a time, one of the hot terms attracting media attention.

1 Family farms are a major way to promote agricultural development

Abroad, especially in some European and American countries, it is very common for agriculture to be operated with the family as the unit. This has developed for more than a hundred years, and family farms have become one of the main ways to promote agricultural development. Family farms there generally have vast land, and the supporting production and operation management models have also become increasingly mature, showing characteristics such as a high degree of mechanization and scaled, intensive operation.

From the perspective of their forms of existence, family farms are divided into large, medium, and small family farms. Those in the United States and Canada are large family farms, those in European countries such as France are medium-sized family farms, and those in Japan and the Taiwan region are small family farms.

In the United States, large farms accounting for 25% of the total number of farms produce 85% of the country's total agricultural output, and this proportion is still gradually rising. Across Germany, family farms are the common form of agriculture and constitute the physical foundation of German agriculture. “Large” family farms operate land of more than 100 hectares, with 29,300 nationwide, accounting for 8.29% of the total number of German agricultural enterprises; “medium” family farms operate land of 30—100 hectares, with 104,000 nationwide, accounting for 29.44% of the total; “small” family farms operate land of 2—30 hectares, with 218,500 nationwide, accounting for 61.94% of the total.

Looking across the development of these foreign family farms, the following experiences can be drawn on: the establishment of land lease systems and the relative concentration of land, the separation of farmland ownership and use rights, scaled operation and diversified organizational forms, specialization of production and operation, high technology and mechanization in agricultural production, and strong government support for agriculture, among others.

Some of these experiences are the same as China's policies, while in others, such as high technology, mechanization, and specialization, there are still some gaps, and further efforts are needed to continue strengthening development.

While seeing these experiences, it is also necessary to see the fundamental gap, which is the difference in national conditions. Foreign family farms have regional and demographic characteristics: rural areas and farms often have few people and much cultivated land, especially after long-term urbanization, the population has greatly decreased, the degree of land concentration is relatively high, and a considerable portion of farm cultivated land has been passed down from ancestors and does not require land transfer. This differs from China's actual situation of a large population and little land, especially because the land for family farms needs to be transferred from other farmers, making their operation similar to an upgraded version of large-scale farming households.

2 Behind the phenomenon of farmers refusing land transfer

So how should family farms be developed in China?

We believe that to develop family farms well, under marketized conditions, it is necessary to respect the enthusiasm of two actors: the farm owner and the farmer household. First, look at the typical rational practices of farmer households. With farmers going out to work and the widespread use of agricultural inputs today, farmers' planting methods have changed greatly, and farmers in various places have used their own intelligence to create planting methods suited to their own households.

My hometown is in the plains of eastern Henan, where the land yields three crops in two years. The main crops are winter wheat and autumn corn, soybeans, and other crops.

In November of the first year, winter wheat is planted in the fields and basically requires no management until the Spring Festival. After the Spring Festival, taking advantage of the rain, they spread fertilizer once, and then the male and female laborers in the household all go out to work.

In spring, the wheat grows vigorously. Through solar terms such as Qingming and Guyu, when the wheat is flowering, pests and diseases are most likely. At this time, they have already paid in advance a certain pesticide fee and labor fee to households that do not go out to work. In rural areas, honesty is valued; having taken someone else's money, people generally still apply the pesticide properly, so insect damage is not a concern.

Around “June 1,” when the wheat ripens and is harvested, they return home from other places to harvest the wheat and plant corn and soybeans. Over about twenty days, they can also look after the elderly and children at home and, at the same time, take something of a rest.

After planting corn or soybeans, they immediately apply herbicide once. When the corn comes up, there is not a single weed, so there is no need to go to the fields to weed.

Next, there are two ways to handle the farming work. One is for the whole family to go out and give the labor fees for fertilizer and pesticides to people in the village to do the work; the other is for the male laborer to go out to work while the women work at home, mainly applying fertilizer and spraying pesticides. Around National Day, at the time of the autumn harvest, the male laborers return home, harvest together, and then plow the land and plant winter wheat.

In this way, over a year, one mu of land can bring in more than 1,000 yuan, and in a good year also 2,000 yuan. As for the travel expenses back and forth, they can be counted as the cost of visiting family. As for the time, it can be counted as leisure. Farming and working are both taken care of, which can be considered migratory-bird-style work.

In many reports, one often sees that no one is willing to transfer land and that work must be done household by household. In fact, this also reflects the rational side of farmer households, who believe that farming it themselves is still more cost-effective.

3 Maximizing cultivated land returns is key

The Guiding Opinions of the Ministry of Agriculture on Promoting the Development of Family Farms (Nong Jing Fa [2014] No. 1) pointed out that “family farms, as a new type of agricultural operating entity, take farmer household members as the main labor force and take agricultural operating income as the main source of income, using household contracted land or transferred land to engage in scaled, intensive, and commercialized agricultural production.” From the above cases, it can be seen that most farmers regard land as a “life-sustaining field” and an employment “insurance field,” so they would rather practice extensive farming or leave land idle than transfer it out. At the same time, it should be noted that transfers now require long-term contracts, and the expected rise in land rent is also a practical aspect they consider. If land is transferred to a farm for about 1,000 yuan per mu, or even less, it is not as cost-effective as farming it oneself, so most farmer households are unwilling to rent it out.

It also believes that family farms fit the stage of economic and social development, are an upgraded version of farmer household contracted operation, and have become an effective force leading moderate-scale operation and developing modern agriculture.

At present, compared with traditional small farmers, China's family farms have the characteristics of “two highs and two lows” and possess the development rationality of standardization and moderate land scaling. The “two highs” are that the average educational level of farm owners is relatively high and the average asset level of farms is relatively high. The “two lows” are that the average age of farm owners is relatively low and the proportion of long-term hired workers participating in production and operation is relatively low, with the main form being a husband and wife plus short-term hired workers.

At the same time, the ideal average land scale for family farms is about 600 mu. 25% of farm owners say the reason for not expanding land scale is that “the land scale is already large enough.” These two results show that, in long-term production practice, family farm owners have a relatively rational understanding and grasp of the appropriateness of operating scale. In addition, as many as 95.38% of farms have signed formal land transfer contracts, reflecting the characteristics of standardized development of family farms.

In our view, the formation of scale and continued development of family farms in rural areas must result in a win-win outcome; otherwise, neither farmer households nor farm owners will let family farms exist for long. Theoretically, scaled agricultural operation is a feasible choice for escaping this dilemma, but this involves the distribution of land rights and interests, a master gate that affects the whole body. In this sense, maximizing cultivated land returns becomes the key to family farms.

According to the March 20, 2013, People's Daily report “Can Family Farms Ease the Contradiction of Farming,” Li Jun, a 36-year-old from Hexi Village in Langxi County, had transferred nearly 700 mu of land since establishing a family farm in 2007, with “net income per mu reaching about 400 yuan, earning nearly 300,000 yuan a year.” After deducting transfer fees, production costs, and so on, the net income per mu is only 400 yuan. If the scale is not large, the profit margin is pitifully small.

Feng Jianqiang, director of the Agriculture Committee of Songjiang District, Shanghai, told reporters that generally, with an operating scale of 100—200 mu of rice fields, plus agricultural subsidies and so on, a family farm can earn at least nearly 100,000 yuan, almost double the income of ordinary work. Their conclusion is that “farming is more profitable than working.”

However, one should not look only at this attractive result, but also at how much capital the farm owner has put in and what the ratio of income to cost is. Does working require such a large capital input? How many farmer households can afford this capital? These are all practical issues. In addition, there is the distribution of profits and interests. Transferring land out should not bring more income than farming and operating it oneself; otherwise, family farm owners would not do a loss-making business.