Large-scale grain farming lost over 2 million yuan in 3 years, why did it ultimately go bankrupt?
Liang Ziran, a farmer from Yongchuan, Chongqing, was known as the "Grain King of Ten Thousand Mu." As early as 2009, he contracted over 10,000 mu of farmland for large-scale cultivation. Liang Ziran's contract price was 810 yuan per mu, but the actual payment already exceeded 900 yuan. Over several years, Liang Ziran not only failed to make a profit but accumulated losses of over 2 million yuan, and had to withdraw from all transferred land in 2012, ending his grain farming in bankruptcy.
The magazine Ban Yue Tan reported on the bankruptcy story of the "Grain King" on the 9th. Under the spirit of the Central Document No. 1 requiring accelerated agricultural modernization and scaling up, how to avoid repeating the "Grain King's" mistakes is worth deep reflection.
The following is the original text:
Editor's note: In the process of large-scale land transfer in some traditional agricultural areas, new problems and risks have gradually emerged and urgently need to be resolved. With accelerating land transfer, steadily rising agricultural input prices, and persistently high grain farming costs, large-scale grain farmers generally feel financially strained. Many large farmers have no choice but to borrow money everywhere, some even resorting to usury to farm. At the same time, agricultural socialized services supporting land transfer, such as agricultural machinery services, pest and disease control, market information, and product marketing, are developing seriously behind schedule.
Since 2009, farmer Liang Ziran from Yongchuan District, Chongqing, rented over 10,000 mu of grain fields for large-scale operation. To improve grain farming efficiency, Liang Ziran designed a complete intensive production plan: forming labor cooperatives to solve the problem of no one to farm the land; establishing agricultural machinery service teams to improve grain farming efficiency; unified seed supply, fertilization, and plant protection to ensure grain quality... But this seemingly complete intensive design ran into obstacles in reality, with production costs exceeding grain farming profits. The "Grain King" accumulated losses of over 2 million yuan and ultimately went bankrupt.
Large-scale farming with intensive management, the "Grain King" pioneered a new farming model
Liang Ziran is a villager from Shiduiwo Village, Zhutuo Town. He went out to work in his early years, and after returning home started a rice processing factory with annual sales revenue of over 20 million yuan. He told Ban Yue Tan reporters: "In rice processing, the most troublesome thing is having to purchase rice from individual households. Grain sources are not guaranteed, rice varieties are inconsistent, good and bad are mixed together, pesticide residues are high, and it's hard to sell at a good price. Therefore, I had the idea of renting land to grow grain myself."
In early 2009, Liang Ziran rented 10,663 mu of rice fields from 2,632 farmer households across 47 villager groups in 8 villages of Zhutuo Town, Yongchuan District, to plant rice, becoming Chongqing's largest "Grain King."
To farm over 10,000 mu of land well, following the intensive design, Liang Ziran organized 15 labor cooperatives based on village units. Liang Ziran was responsible for uniformly providing production materials such as pesticides, fertilizers, and improved seeds. The cooperatives completed labor contracting, handling labor needs for production stages including seedling cultivation, pumping irrigation, pesticide application, harvesting, and drying, with Liang Ziran paying labor fees.
To improve farming efficiency, Liang Ziran also organized an agricultural machinery service team of over 30 people, responsible for unified planting of improved seeds, unified pest and disease control, unified fertilization, and unified mechanical cultivation and harvesting. Unlike the seasonal and periodic workers provided by labor cooperatives, the agricultural machinery service team was a year-round professional team, with each person earning over 1,500 yuan per month.
Liang Ziran himself did not know how to farm, so he specifically hired 8 agricultural experts as technical advisors at a monthly salary of 1,700 yuan. After renting the land, Liang Ziran also specifically registered the "Daosen" premium rice brand. According to Liang Ziran's intensive production design, the ten-thousand-mu grain fields could provide a stable grain source of about 5,500 tons per year, and through unified improved seeds and unified production standards, establishing a brand could also greatly increase the added value of rice. Liang Ziran said: "Ordinary rice sells for about 1.2 yuan/jin on the market, while the premium rice I produce can reach 1.7 yuan/jin. If through intensive production it can reach pollution-free and green rice standards, the price can double."
Liang Ziran calculated: After land transfer, the average input cost per mu is about 960 yuan. Through intensive management, break-even can be achieved in the grain production stage, and profits can be made in the rice processing stage. Planting over 10,000 mu of paddy fields, annual net income could reach about 2 million yuan.
Intensive and large-scale operations hit obstacles everywhere, losing money year after year
In the process of large-scale farming, Liang Ziran's seemingly complete intensive production plan for ten thousand mu of grain fields, on one hand, failed to reduce grain farming costs; instead, due to soaring hired labor costs, it continuously squeezed grain farming profits. On the other hand, it failed to solve the problem of fragmented plots and high input per unit area; instead, the larger the rented area, the greater the losses.
When first renting land in 2009, the labor contracting price Liang Ziran signed with labor cooperatives was 810 yuan/mu, but due to severe rural labor shortage and supply falling short of demand, Liang Ziran's actual payment to cooperatives already exceeded 900 yuan/mu.
"The most thorny problem in renting land for grain farming is the severe shortage of rural labor. The labor cooperatives mostly hire casual workers. If the price is low, they would rather go out to work. The actual labor price often exceeds the contract price, and we have no way to constrain them." Liang Ziran said helplessly. Affected by the obvious rise in labor prices, Liang Ziran lost over 500,000 yuan in his first year of farming.
In the western hilly agricultural areas, grain fields are highly fragmented and farmland water conservancy infrastructure is backward. The agricultural machinery service team organized by Liang Ziran had greatly reduced effectiveness, failing to play a role in reducing costs and improving efficiency.
"The over 10,000 mu of land I transferred is fragmented into over 8,500 rice field plots. Although there is an agricultural machinery service team and over 2 million yuan worth of agricultural machinery equipment, it can only solve the mechanized cultivation problem for about 40% of contiguous paddy fields." Liang Ziran said. The remaining plots could not use the agricultural machinery service team and required large amounts of manpower for scheduling and work assignment, increasing the average cost per mu by more than 2 times. When costs from all stages are spread out, it is even higher than smallholder grain farming.
At the same time, most of the water conservancy facilities supporting Liang Ziran's transferred land were built in the 1960s and 1970s and are now completely abandoned. Just for leveling plots, repairing canals and field roads, Liang Ziran invested another 2 million yuan, but this could only meet the irrigation and mechanized cultivation needs of less than 30% of the plots.
Surface-level intensive management could not solve the real production difficulties. From 2009 to 2010, Liang Ziran's average cost input per mu was nearly 1,400 yuan, and grain farming continued to lose money. In 2011, Liang Ziran had to reduce the transferred area to 2,900 mu, but that year he encountered frost damage and drought, with grain production dropping by over 30%, making it impossible to pay farmers' land rent, and he also owed over 200,000 yuan in worker wages and pesticide material payments. By 2012, Liang Ziran's cumulative losses from farming had reached over 2 million yuan, and he had to withdraw from all transferred land, ending his grain farming in bankruptcy.
Blind investment in agriculture needs vigilance, policy support system needs improvement
Ban Yue Tan reporters followed Liang Ziran back to the farmland he had once subcontracted, and saw that some plots had been planted with trees, some had been converted into fish ponds, and quite a lot of land was left barren, with only occasionally one or two elderly farmers seen plowing the soil. Seeing such scenes, Liang Ziran sighed repeatedly.
Why, with a complete intensive design, was grain farming still not profitable, or even losing money? After reflection, Liang Ziran believed there were mainly two reasons:
First, farming was excessively pursued on a large scale with blind investment, without truly achieving moderate-scale operation. Liang Ziran admitted frankly that he initially farmed with passion, without fully considering agricultural production realities and without conducting risk assessment. Subcontracting 10,000 mu of land required an average annual investment of over 10 million yuan, which already exceeded Liang Ziran's economic capacity. As long as there was one year of operating losses, it was easy for the capital chain to break, and the interests of both Liang Ziran himself and the farmers would be harmed.
Second, the construction of policy support systems such as government agricultural subsidies, agricultural finance, and insurance lagged behind, making large farmers' ability to withstand risks fragile.
Large-scale farming requires large amounts of capital investment. Since starting large-scale farming, Liang Ziran worried about money almost every day. "Government agricultural subsidy standards are low and often delayed. Even at bankruptcy, the government still owed me over 300,000 yuan in subsidy payments." Liang Ziran said he ran to banks for loans constantly, but it was very difficult. Agricultural project investment cannot form fixed assets and cannot be used as collateral for financing. He could only raise money everywhere, even borrowing at usurious rates.
"Since I started grain farming, I have encountered natural disasters of varying degrees almost every year, but the disaster losses could only be borne by myself." Liang Ziran also frequently visited various insurance companies in Yongchuan to inquire about agricultural insurance, but the answers he received were all "agricultural risks are too great, companies do not offer related insurance types."
Liang Ziran believes that investment risk assessment, socialized service support, policy subsidies, agricultural finance, and insurance are all interlinked. If these links could all function, his intensive operation might not have failed so completely. Facing failure, Liang Ziran was still unwilling to give up. He was still planning to go out and investigate, preparing to contract land for grain farming again.
Agricultural projects "piling up large farmers" carry heavy risks
In some traditional agricultural areas, Ban Yue Tan reporters walked through villages and households, went deep into fields, and listened to the bittersweet experiences of large-scale farmers. Many farmers reported that in the process of large-scale land transfer, some new problems and risks have gradually emerged and urgently need to be resolved.
To develop agricultural production, the central government encourages moderate-scale operation through land transfer, but in practice, the standard for "how large is moderate" is relatively vague. Ban Yue Tan reporters found during research in various places that in recent years some localities have proposed vigorously promoting land transfer, resulting in a trend of seeking large scale and rapid speed, with some large farming and breeding households and family farms suffering from serious "false plumpness."
In a major grain-producing county in central China, as of 2013, the county had over 80 agricultural large farmers with transferred land of over 1,000 mu, 11 with over 4,000 mu, and 3 with over 10,000 mu, with the largest household having transferred nearly 40,000 mu of land.
During interviews, grassroots cadres admitted that large-scale land transfer was seen by leaders as an indicator for measuring agricultural development achievements. Although agricultural departments do not endorse large-scale land transfer, higher-level officials strongly favor it, because "big projects" are visible achievements.
Coincidentally, a major agricultural city in central China also experienced similar problems of excessively large land transfer scale. According to an analysis of land transfer projects by the agricultural department, this city had over 400 cases of one-time contiguous transfer of over 1,000 mu, covering nearly 800,000 mu, accounting for nearly half of the already transferred area. Many land transfer projects did indeed encounter problems such as "enclosing land and occupying fields creates future troubles, excessive scale carries risks" during development.
Local agricultural bureau cadres told reporters that excessive land transfer area means large investment and great market risks, which does not meet the requirements of moderate-scale operation. Once market risks are encountered, it is easy to trigger production fluctuations and affect social stability.
Apart from "piling up" large farmers through administrative orders and assigned targets, when some social capital enters agriculture, it is unfamiliar with the operating projects and blindly believes that the larger the transfer scale, the higher the operating efficiency. When capital, technology, and manpower cannot keep up, risks are also easily generated. After Chongqing Yongchuan District grain farmer Liang Ziran went bankrupt, quite a lot of transferred land was also forced to be left barren, creating enormous waste.
In the view of Zhang Hongsong, president of the Chongqing Agricultural Society, large-scale land operation carries relatively high risks. The principles that should be adhered to are: First, whether land is transferred, how prices are determined, and how forms are chosen should be decided autonomously by contracting farmers, and simplified administrative intervention methods cannot be used to promote transfer. Second, strictly establish thresholds for social capital entering agriculture, effectively assessing their operating capacity, project prospects, and expected risks to reduce land transfer risks.
"If there were professional services, why spend so much on buying so much agricultural machinery"
Ban Yue Tan reporters found during interviews that with accelerating farmland transfer, large-scale farmers are constantly emerging in various places, but agricultural socialized services supporting land transfer, such as agricultural technology extension, agricultural machinery services, pest and disease control, market information, and product marketing, are developing behind schedule. Insufficient supply of socialized services has forced many large agricultural farmers to "do everything themselves," even suffering from "the do-it-all syndrome."
"Farming yields only about 500,000 to 600,000 yuan in annual profit. If professional organizations could provide low-cost services, why spend so much on buying so much agricultural machinery equipment?" Speaking about spending over 700,000 yuan on more than 30 pieces of agricultural machinery for farming, He Shisu, a large grain farmer from Lianhe Township, Pengshui County, Chongqing, revealed helplessness in his words.
The reason He Shisu "did everything himself" with agricultural machinery was that the development of agricultural machinery service organizations in Pengshui County could not keep up with the growth rate of large farmers. Luo Yuanjiang, director of the Pengshui County Agricultural Committee, introduced that Pengshui County has over 700,000 mu of arable land, and in 2012 large grain farmers grew to 118 households, while currently the county has only 1 agricultural machinery professional cooperative with only 15 pieces of agricultural machinery. "10 large farmers would have to share one piece of agricultural machinery. What kind of service could that provide?"
In Henan's agricultural areas, large agricultural farmers also face similar difficulties. Liu Xueyou, a farmer from Pengdian Township, Xi County, Xinyang City, Henan Province, transferred over 3,000 mu of land to plant sorghum. He said: "Sorghum planting has very high requirements for seeding technology and pesticide application, but the county's plant protection cooperative lacks talent. Most hired workers are idle laborers over 55 years old, and many do not know how to use agricultural machinery. Their grasp of pesticide mixing ratios and mechanical spraying is also imprecise, and pesticide residues often exceed standards." To solve sorghum plant protection problems, Liu Xueyou had to organize a plant protection labor team of over 20 people himself, personally handling every step from seedling cultivation, seeding, field management, harvesting, to storage.
At the same time, with the continuous development of agricultural marketization, large grain farmers' demand for professional services has expanded from purely production stage services to comprehensive services including finance, information, processing, and transportation. Compared with mid-production socialized services such as agricultural machinery and plant protection, the construction of pre-production and post-production service systems is even weaker.
Wang Fujun, a farmer from Qiaomiao Township, Wuzhi County, Henan Province, transferred 1,700 mu of land with annual grain output exceeding 1.5 million kilograms. Wang Fujun said: "What large farmers care most about in grain farming is professional market information such as grain collection and storage, supply and demand, and grain price trend forecasts. But currently this service area is basically still blank."
"Grain farming suffers from 'anemia,' cannot do without usury"
With accelerating land transfer, steadily rising agricultural input prices, and persistently high grain farming costs, large grain farmers' capital demand has increased, and they generally feel financially strained. To farm grain, many large farmers have no choice but to borrow money everywhere, some even resorting to usury to farm.
"I used to contract 30 to 40 mu of land with limited capital investment that I could solve myself. But now my land subcontracting area has exceeded 1,200 mu, with annual investment approaching 1.5 million yuan. Grain farming has already contracted 'anemia,' and I cannot do without usury!" said Wang Mingjie, a farmer from Lu Village, Lu Village Township, Jieshou City, Anhui Province. "Getting a loan from the credit union is very difficult. Farmers have no collateral, and no one will give you a loan." Last year, to farm grain, Wang Mingjie searched through more than 10 relatives, piecing together just over 400,000 yuan. The largest single lender lent 100,000 yuan, with the rest ranging from 20,000 to 30,000 yuan. He had to write IOUs and sign and stamp for each household individually. Obviously, once natural or man-made disasters cause the capital chain to break, bankruptcy is very likely.
Ban Yue Tan reporters found during interviews in various places that the capital "anemia" suffered by large agricultural farmers is relatively serious. Taking Chongqing as an example alone, according to a survey by the Chongqing Municipal Agricultural Committee's special research group, the financing demand of the city's 17,000 agricultural cooperatives is nearly 6.5 billion yuan, but currently only 140 million yuan in loans have been obtained, with a demand satisfaction rate of only 2.15%. In addition to paying bank loan interest, agricultural loans generally also require additional guarantee fees, collateral asset appraisal fees, and handling fees, making the actual cost of agricultural loans higher than urban non-agricultural loans.
At the same time, due to the high-risk nature of agricultural production itself, agricultural credit projects are determined to be high-risk and highly unpredictable, which conflicts with commercial banks' needs for asset safety, liquidity, and profitability. Zhang Gaomin, a large grain farmer from Xiwang Village, Zhongzhang Town, Jingyang County, Shaanxi Province, said with a bitter smile: "I went to the bank for a loan, and the bank people said, 'You're just farming, why do you need a loan!'"
Regarding the difficulty of usury for farming, many large grain farmers suggest implementing benchmark interest rates for farmers' production loans, with the difference subsidized by fiscal interest discounts, thereby stimulating farmers to borrow from formal financial institutions. At the same time, from the perspective of benefiting farmers and ensuring food security, farmers' grain farming should enjoy benchmark interest rates or even lower rates, and the state can provide interest discount policies to banks.