Don't Let Excessive Land Transfer Fees Undermine the Enthusiasm for Growing Grain

Editor's note:As the state encourages and supports the transfer of contracted land to specialized large-scale operators, family farms, and farmer cooperatives to develop various forms of appropriately scaled operations, land transfer is in full swing across the country. However, rising transfer fees are continuously shrinking the profit margins of large grain-growing operators and other new types of business entities. While feeling the pressure, some have already been forced to give up growing grain and switch to other more profitable cash crops. How can the reasonable returns of these new types of grain-growing business entities be ensured? How can their enthusiasm for growing grain be protected? These questions are worth pondering.

On one side, land transfer fees are rising; on the other, profit margins are limited——

What Should Anhui's Large Grain Growers Do?

As land transfer fees get closer and closer to the “ceiling” while the profit margins of grain farmers have not risen correspondingly, how are large grain growers reacting? And how is the government thinking about and solving this widespread problem? With these questions in mind, the reporter conducted an investigation in Anhui, a major agricultural province.

Putting “eggs” in Multiple Baskets

⟦NL> Chuzhou City, located in eastern Anhui, has been a major “granary” of Anhui since ancient times. Local farmer Wang Shouming began transferring land to grow grain in 2010. “At that time, there were two ways to settle the transfer price. One was paying in grain, 450 to 500 jin of paddy rice per mu; the other was paying in cash, about 600 yuan per mu. Every three to five years, the transfer fee would increase by a certain percentage. Since 2013, the rental fee for the land I transferred has risen to 550 jin of paddy rice per mu.” Wang Shouming said. On one hand, land transfer fees were rising; on the other, production materials and labor costs were increasing. This made Wang Shouming feel obvious pressure.

Because his transferred land reached nearly ten thousand mu, Wang Shouming admitted that he had benefited from certain agricultural subsidy programs. “But ordinary large grain growers can hardly benefit from project subsidies. The grain-growing subsidies they can actually get are only the 10 yuan per mu improved seed subsidy, the 10 yuan per mu large grain grower subsidy, and the newly added 20 yuan per mu straw burning ban subsidy in the past two years.” Wang Shouming told the reporter that in 2012, the local government provided policy subsidies for land transfer, and he received a subsidy of 100 yuan per mu. But that was only a one-time subsidy. For the land transfer fees that must be paid “unfailingly” every year, these subsidies are merely “a drop in the bucket.”

Facing ever-rising costs and unpredictable natural risks, even a large grain grower like Wang Shouming still felt surrounded by crises and had to “break through.” “Starting from purely growing grain, I set up some experimental plots to grow greenhouse grapes. If the market prospects are good, I will gradually increase the grape area.” Wang Shouming said. On the other hand, he is also working on developing agricultural social services and a sales company. In this way, by putting “eggs” in multiple baskets, the risk of growing grain can be reduced.

Growing Grain Requires Growing “High-Priced Grain”

“The transfer price here has already reached 1,000 jin of wheat per mu, which is relatively high in Anhui Province.” Xu Congxiang, a farmer from Taihe in northern Anhui, transferred ten thousand mu of land for wheat cultivation. Although the transfer fee is not low, for old Xu it is not a problem. “First, I understand technology and can grow high-yield fields; second, what I grow is seed grain, which commands a high market price; third, I use large agricultural machinery, which greatly reduces labor costs. So my farming profits are still decent.”

Zhang Litao, a large grain grower from Lu'an in western Anhui, is a modern professional farmer. “In recent years of growing grain, transfer fees have risen almost every year. Now in the Lu'an area, the transfer fee has risen to 700 jin of paddy rice per mu. But we also continuously reduce costs and increase efficiency by improving technology and finding stable markets.” Zhang Litao said. When he abandoned his urban white-collar life to return to Anhui to grow grain, he had already done a thorough market risk assessment. Now he is already looking for new opportunities for future agricultural development. On one hand, he leads by example through his own cultivation; on the other hand, he helps more large grain growers sell their grain through cooperation with downstream grain processing enterprises. He also plans to establish files on large grain growers and promote agricultural social services.

Giving Up Halfway Is Common

Compared with these experienced modern agricultural business entities, traditional large grain growers appear relatively worried about rising land transfer fees. “When I started growing grain ten years ago, the transfer fee was only just over 100 yuan per mu, and now it has risen to more than 500 yuan per mu. At this rate, the profits are getting lower and lower. I am preparing to retire.” Ge Yixue, a large grain grower in Feixi County, Hefei City, central Anhui, said that in recent years, due to regional differences, more and more outsiders have come to their area to transfer land, which undoubtedly intensifies cost competition. Because competition is fierce, many large grain growers dare not invest too much in infrastructure, fearing their money will be “thrown into the water.” In fact, in the long run, this is not conducive to grain production.

With the arrival of an agricultural investment boom, frequent changes of ownership of transferred land are no longer anything new. In order to protect farmers' interests from being harmed under market fluctuations, some government departments have introduced many countermeasures. For example, in Hefei, the capital of Anhui Province, the local agriculture committee introduced a system requiring deposits to be paid in advance to guard against land transfer risks. However, risk prevention and compensation mechanisms for agricultural business entities are rarely mentioned.

Let the Market “Decide”

“Although our county is a major grain-producing county, it has not issued direct reward and subsidy policies targeting grain-growing entities. Considering the growing affordability pressure on grain-growing entities, Lujiang County has achieved protection for large grain growers through subsidies to social service organizations, raising standards and expanding coverage for crop insurance, and subsidies in other areas.” Deng Benyi, director of the Lujiang County Planting Industry Bureau, told the reporter that although indirect subsidies cannot solve all problems, they are at least beneficial to grain-growing entities.

“This is actually a contradiction between the protection of farmers' land income and the ever-rising costs of agricultural operations. I personally believe the government can only guide in an orderly manner, let the market set prices, and moderate the excessively high portion. Through other channels, it should help and support agricultural business entities in financing such as loans and insurance, so as to smooth over the contradictory relationship.” Huang Qiuyun, deputy director of the Anhui Provincial Planting Industry Bureau, said.

“In the early stage, the government may intervene and guide, but as competition develops, it must gradually withdraw from the mechanism of intervening in the market. The two things we are currently focusing on are in fact effective ways to solve this problem. First, through technology popularization and guidance, improve per-unit yield and efficiency. Second, do a good job in training professional farmers and improve the management capabilities of business entities. Through these ‘two hands,’ more agricultural business entities will strengthen their ability in scientific planting and management, reduce costs and increase efficiency in actual farming, and escape the troubles of the ‘ceiling.’” Wang Hua, deputy director of the Anhui Provincial Agriculture Committee, said.
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