Non-staple crops should be gradually liberalized, with subsidies and state purchasing and storage moderately reduced
Recently, the Central Economic Work Conference was held, calling for an accurate grasp of the new normal in economic development. When deploying the main tasks for next year's economic work, it called for accelerating the transformation of the agricultural development model. Against the backdrop of advancing new urbanization, the development of agricultural modernization has become a key link.
Just as the Chinese economy has entered a new normal, in the course of modern agriculture's development, the “smallholder economy” is gradually weakening and beginning to show new characteristics. Land transfer has made large-scale operations a reality, and farmers' incomes have risen accordingly. In addition, the fact that the prices of some agricultural products [2.58% funds research report] are higher than those abroad is also forcing a large-scale transformation of agriculture to reduce costs.
On December 14, at the Sanya Finance International Forum, Liu Yonghao, chairman of New Hope [0.47% funds research report], said in an exclusive interview with China Business News that there are four aspects to the new normal in agriculture, and that one of the bottlenecks of modern agriculture is the lack of scale. Under pressure from the market, the transformation of agricultural development is now underway and will accelerate.
Liu Yonghao
The four new normals in agriculture
China Business News: The Central Economic Work Conference that just concluded mentioned that the economy has entered a new normal. In agriculture, what are the manifestations of this new normal? How do you view the transformation of the agricultural development model?
Liu Yonghao: Now, the new normal in agriculture has four manifestations: First, the problem of agricultural product supply has basically been solved, but this is only a basic solution in terms of quantity; issues of quality, variety and cyclical fluctuations in agricultural products still exist. Second, after large numbers of farmers moved to the cities, large-scale planting and breeding in agriculture are underway. Third, farmers' incomes are now lower than those of urban residents, and this pattern needs to be improved as soon as possible. Fourth, for agricultural products, whether grain or meat, eggs and milk, the prices of basic agricultural products far exceed those on the international market.
This is because the scale of agricultural production and the structure of the production system are undergoing rapid change, and the transformation from traditional agriculture to modern agriculture is also underway. The core lies in expanding the cultivated area per household and improving efficiency through land transfer. There is also the advance of animal husbandry and food processing toward modernization and large-scale operation. These are some of the pressures, opportunities and difficulties agriculture faces under the new normal.
China Business News: How do you view the future transformation of the agricultural development model?
Liu Yonghao: The transformation of agricultural development is now underway and will accelerate, because of pressure from the market. This is mainly because it has become normal for farmers working in the cities to earn an annual income of 30,000 to 40,000. This means that the scale of both crop farming and livestock breeding must expand; without expansion, incomes cannot rise.
However, price increases are constrained by international agricultural product prices, and under a gradually opening market, the ceiling effect is becoming increasingly obvious. The only solution is to rely on expanding scale. Precisely because of this, the development of modern agriculture has become possible. One of the bottlenecks of modern agriculture is the lack of scale.
The transformation of modern agriculture under market pressure
China Business News: The industry in which New Hope Group operates has a history of several thousand years. The “smallholder economy” is this industry's mode of production, which scholars have criticized as “small, scattered and chaotic.” How do you view the value of the smallholder economy's existence?
Liu Yonghao: The smallholder economy is transforming toward large-scale operation; this is now underway and the transformation is fast. The advantage of the smallholder economy is that it can remain relatively stable, and farmers can ensure basic self-sufficiency through their labor. However, this is clearly not conducive to raising farmers' incomes or to the development of modern agriculture, and reform is necessary.
At first it was policy encouragement; now it is pressure from the market. Because the advancement of urbanization has brought large numbers of farmers into the cities, land transfer and large-scale farming have become possible. At the same time, this has also made the large-scale and modern development of animal husbandry and the food industry possible.
In other words, this gradually expanding production has greatly raised farmers' incomes, thereby weakening the smallholder economy. This process is gradual, and recently there has been a trend toward acceleration; the state should do its utmost to support, encourage and promote this transformation. This is the transformation of modern agriculture.