Pathways to Achieving Coordinated Development of the Agricultural "Sixth Industry"
Regarding the integration of the primary, secondary and tertiary industries in agriculture, the 2015 No. 1 Central Document devoted a special discussion to this in Part II, Article 12. Drawing on my own field research in rural areas, I would like to share my views on how the primary, secondary and tertiary industries should be integrated in order to achieve coordinated development of the agricultural “sixth industry”.
The same business entity participates in the entire process of the agricultural supply chain
The secondary and tertiary industries in the agricultural “sixth industry” refer to the processing industry for agricultural products and the sales and service industries for agricultural products. What we usually call the secondary and tertiary industries refers to the entire processing and service industries, which have a far broader scope.
It should be particularly emphasized that the coordinated development of the agricultural “sixth industry” mentioned here, namely the integrated interaction of the primary, secondary and tertiary industries, is accomplished by the same business entity. In the past, our primary, secondary and tertiary industries were also closely linked to one another, except that they were accomplished by different entities. For example, dairy farmers were responsible for producing milk, processing enterprises processed the milk into various dairy products, and supermarkets specialized in selling dairy products. This process was completed by three independent entities. Dairy farmers in the primary industry could not obtain the high profits from processing and sales in the secondary and tertiary industries at all, and dairy farmers were the poorest class in the entire industry chain.
Two successful cases in Shaanxi Province
For a long time, the income of primary industry operators has been relatively low, causing farmers to become one of the lowest-income groups. Although the state has introduced a series of policies benefiting farmers, issuing 12 No. 1 Central Documents related to agriculture, rural areas and farmers from 2004 to 2015, and various agricultural support funds in 2014 reached as high as 1.3 trillion yuan, farmers' incomes have improved, but there has been no fundamental turnaround. A large number of rural young people, in order to obtain higher incomes, have fled the countryside and gone to cities to work. However, 1.3 billion people need to eat, the land must be farmed by someone, and arable land is decreasing while the population is increasing. Therefore, not only must someone farm the land, but it must be farmed by highly qualified people. The way to attract highly qualified people to engage in agricultural production is to raise their incomes, bringing them on par with, or even higher than, the incomes of urban residents. Yet in 2014, the per capita net income of farmers was only equivalent to 1/3 to 1/4 of the income of urban residents.
If farmers are allowed to extend the industry chain, extending the primary industry into the secondary and tertiary industries, farmers' incomes will increase.
For example, a family farm in Shaanxi raised more than 700 pigs. Calculated according to the sluggish hog market in 2014, this farm would certainly have lost money, but in fact this family farm not only did not lose money, but earned more than 2 million yuan. The main reason is that the farm owner simultaneously operated the primary, secondary and tertiary industries. He not only raised pigs (primary industry), but also slaughtered and processed pork (secondary industry), and also ran a farmhouse restaurant (tertiary industry). Although the primary industry had poor returns, the secondary and tertiary industries had relatively good returns, so the overall returns were still very good.
The situation at the Shaanxi Weier Vineyard that I investigated was the same. In 2014, grape prices in Shaanxi fell sharply, to only 1/2 or even 1/3 of those in 2013. Grape-growing farmers almost all suffered losses, but the Weier Vineyard achieved relatively good returns. This is because the vineyard owner Hu Weichen not only planted 380 mu of grapes, but also carried out wine brewing, and held leisure tours and wine-tasting events at the vineyard, integrating the primary, secondary and tertiary industries of grapes together, thereby obtaining good economic benefits.
Only by developing the “sixth industry”, extending the agricultural industry chain and value chain, and raising operators' incomes, will outstanding talent in society be willing to engage in agriculture, and only then can agriculture develop sustainably and stably. This is a qualitative change and leap in the mode of agricultural operation and the mode of agricultural development.
Conditions for the development of the agricultural “sixth industry”
For agriculture to transform from a single primary industry into the “sixth industry” and achieve the integration of the primary, secondary and tertiary industries in agriculture, certain conditions must be met.
First, agricultural production must have a certain scale. If a farmer raises 3 chickens, he will treat chicken-raising as a sideline and will not care about extending the industry chain or new rearing techniques. This is also one of the reasons why the extension of agricultural science and technology in our country is difficult. At present, our country has several hundred million farming households, and the scale is too small to extend the primary industry into the secondary and tertiary industries. To change this situation, three conditions should be met: (1) operators devote themselves wholeheartedly, with no energy left to engage in other industries, achieving professionalization and vocationalization of operations; (2) operators are interested in science and technology, with the willingness and motivation to actively seek science and technology; (3) they can basically meet the economies-of-scale needs of secondary and tertiary industry enterprises for raw material supply. This requires household contract operators of farmland to consult and coordinate with other farmers, concentrating production through land transfer. Of course, the government should do a good job of service work in land transfer.
Second, cultivate new types of agricultural operating entities. There are mainly four new types of agricultural operating entities: family farms, specialized large households, agricultural enterprises, and farmers' professional cooperatives. For the primary, secondary and tertiary industries in agriculture to integrate, agricultural operators are required to have relatively strong management capabilities, information acquisition capabilities, and financing capabilities, because after the industry chain is extended, more funds are needed, more people are involved, and products must directly face the terminal market, which naturally places higher demands on operators. Agricultural operators must be replaced by these four new types of agricultural operating entities, replacing hundreds of millions of small-scale farming households. The common characteristics of these four new entities are strong operating capability, sensitivity to market information, and a certain capacity for financing.
Third, the government must provide the necessary environmental conditions for the development of the agricultural “sixth industry”. First, provide the necessary infrastructure such as road networks, water, electricity and communications for agricultural product processing zones. Second, when agricultural operators apply for production licenses for the secondary and tertiary industries, give them possible convenience and preferential treatment; third, in terms of development direction and science and technology services, give necessary guidance and assistance.
Promoting the development of the agricultural “sixth industry” from four aspects
To achieve the integration of the primary, secondary and tertiary industries and promote the development of the sixth industry, we should actively drive and promote it from the following aspects.
1. There are many models for the integration of the primary, secondary and tertiary industries in agriculture. Some are the integration of crop farming and leisure agriculture; some are the integration of livestock farming and processing; some are the integration of crop farming, livestock farming and processing; some are the integration of production, processing and sales, etc. Some typical models can first be established for other operators to imitate. Visits and study trips can also be organized to places where the “sixth industry” is doing well, to guide agricultural operators in establishing their own business approaches.
2. To extend the agricultural industry chain and develop the secondary and tertiary industries in agriculture, the amount of funds needed is relatively large. First, banks should lower the threshold for loans; second, the government should provide loan guarantees; third, farmers should be allowed to establish farmers' fund cooperatives. Solve the funding needs in the development of the “sixth industry” through multiple channels.
3. Operators of the agricultural “sixth industry” who devote themselves wholeheartedly to the agricultural industry chain will become the main force of the agricultural industry. The government should give them preferential policy support, such as more preferential agricultural machinery subsidy policies, stronger grain subsidies, and tax reduction and exemption policies. With the same subsidy standards, large-scale farming households are more motivated than small-scale farming households.
4. Every link in the agricultural “sixth industry” requires technology, especially the processing of agricultural products in the secondary industry, which has higher technical requirements, while the tertiary industry has higher requirements for marketing capabilities. Through training, not only should their technical capabilities be improved, but their management capabilities and marketing capabilities should also be improved.