How the New Agricultural Operating System Will Affect the Future of Chinese Agriculture

An overview of the world shows that household farming has become the dominant choice of agricultural operating form in most countries. Some countries have attempted to replace household farming with corporate-style agricultural operations, but on the whole this has not achieved success of general significance. However, to simply deny the general trend of accelerated development of corporate-style agricultural operations and their comparative advantages in specific fields would also be unrealistic. Corporate farms are the organizational vehicle of corporate-style agricultural operations. Using data from the US Census of Agriculture for 1997-2007, we previously wrote an article analyzing the development of US corporate farms and its implications (Jiang Changyun, Zhang Lidong, 2014). US agricultural census data are released every 5 years, and the latest (2012) US Census of Agriculture data were released in May 2014. This article will use these as a basis to analyze the latest development of US corporate farms, in the hope of offering some inspiration for promoting the transformation of China's agricultural development mode.

The Latest Development of US Corporate Farms and Its Causes

Since 1974, the US Census of Agriculture has defined a farm as a place that produced or sold agricultural products reaching or exceeding 1,000 dollars in the survey year, and has divided farms into 4 types: family or individual farms, partnership farms, corporation farms, and other farms. For simplicity of exposition, this article uniformly abbreviates family or individual farms as family farms. During 2007-2012, the development of US corporate farms mainly presented the following characteristics and trends:

The share of corporate farms in the total number of US farms remained relatively low, but the trend of their number increasing and their share rising became even more pronounced. According to the 2012 US Census of Agriculture data, in the numerical structure of US farms, family farms still held an absolute advantage, and the number of corporate farms and their share of total farms were far below those of family farms. In the same year, the total number of US farms was 2,109,303, among which family farms, partnership farms, corporation farms, and other farms were 1,828,946, 137,987, 106,716, and 35,654 respectively, accounting for 86.71%, 6.54%, 5.06%, and 1.69% of the total number of US farms respectively; the shares of family farms and corporate farms in the total number of US farms rose by 0.25 percentage points and 0.70 percentage points respectively compared with 2007. While the number of family farms decreased, their share of total farms rose somewhat, which had a great deal to do with the faster decline in the total number of US farms. While the total number of farms, especially family farms, decreased, the number of corporate farms showed an obvious increasing trend. During 2007-2012, the total number of US farms decreased by 4.33%, among which the number of family farms decreased by 4.06%, the number of partnership farms decreased by 20.81%, and the number of corporate farms and other farms increased by 11.08% and 26.72% respectively. During the 10 years from 1997 to 2007, the number of US corporate farms increased by only 6.24%, and the share of corporate farms in the total number of US farms increased by only 0.28 percentage points. Compared with 1997-2007, during 2007-2012 the trend of an increase in the number of US corporate farms and a rise in their share was clearer.

The average operating scale of corporate farms was obviously larger than that of family farms, and the gap between the two in output scale was obviously greater than the gap in input scale. The average operating scale of US corporate farms was obviously larger than that of family farms, as can be seen from changes in the proportions of family farms and corporate farms in the groupings of farms by different land sizes. As can be seen from Table 1, although family farms held an absolute advantage in number in the farm groupings of different land sizes, as farm land operating scale expanded, the numerical proportion of family farms showed an obvious downward trend. In each farm grouping with farm scale exceeding 70 acres, the larger the farm land scale, the higher the numerical proportion of corporate farms tended to be. In each farm group with farm scale exceeding 260 acres, the share of corporate farms in the total number of farms in that group had already exceeded the share of all corporate farms in the total number of all farms.

It is worth noting that in terms of average land scale, during 2007-2012 the average land scale of all US farms or family farms expanded somewhat, but the average land scale of corporate farms shrank somewhat. In 2007, the average land scale of all US farms was 418 acres, and the average land scales of family farms and corporate farms were 301 acres and 1,304 acres respectively. By comparison, in 2012, the average land scales of all US farms and family farms increased by 3.83% and 2.33% respectively, but the average land scale of corporate farms decreased by 5.67%. On closer examination, the main reason is that, compared with 2007, although the number of corporate farms in different land-size groupings all increased in 2012, the share of corporate farms with land scale below 220 acres in the total number of corporate farms rose from 49.28% to 51.62%; the share of corporate farms with land scale greater than 220 acres in the total number of corporate farms fell from 50.72% to 48.38%.

Generally speaking, farm operating scale can be observed from two aspects: input and output. At the input level, the main indicators include farm land area, farm production expenditures, market value of farm land and buildings, and market value of farm machinery and equipment. At the output level, the main indicators include sales of agricultural products and farm net cash income. As can be seen from Table 2, compared with family farms and even the average level of US farms, the average scale of corporate farms was obviously larger, and the gap between corporate farms and family farms in average output scale was usually obviously greater than the gap in average input scale. Related to this, in factor inputs, especially agricultural product sales and farm net cash income, although family farms still occupied a dominant position, their dominant capacity was already obviously weaker than the level reflected by the following two proportions. The first is the share of family farms in the total number of US farms, and the second is the share of family farm land area in the total land area of all US farms (see Table 3 for details).

The degree of specialization and intensification of corporate farms was obviously greater than that of family farms, and their land output rate was also obviously higher than that of family farms. In 2012, the share of principal operators whose main occupation was farming in the US was 64.30% for corporate farms, while family farms, partnership farms, and other farms were 46.20%, 57.99%, and 40.01% respectively; family-held corporate farms were 65.87%, and non-family-held corporate farms were 51.37%. Compared with 2007, in 2012 the share of principal operators whose main occupation was farming rose to a certain extent in different types of farms. Although the increase in this share in corporate farms was smaller than in family farms, partnership farms, and other farms, the share of principal operators whose main occupation was farming in corporate farms, especially family-held corporate farms, was still obviously higher than in family farms, partnership farms, and other farms (see Table 4).

From the comparison between the share of agricultural product sales or farm net cash income and the share of farm land area in Table 3, it can be seen that the land output rate of US corporate farms was obviously higher than that of family farms, partnership farms, and other farms. For example, in 2012, the agricultural product sales per unit of land area of corporate farms were 2.28 times that of family farms, 1.45 times that of partnership farms, and 7.77 times that of other farms. However, compared with 2007, in 2012 the gap between family farms and corporate farms in land output rate narrowed slightly. In 2007, the agricultural product sales per unit of land area of corporate farms were 2.61 times that of family farms.

The comparative advantages of corporate farms were mainly concentrated in a small number of fields, especially in the production of agricultural products with weaker seasonal influence, more controllable modern technology, and higher added value. If the distribution of US family farm operating fields is “blooming everywhere,” then the choice of corporate farm operating fields is “focused breakthroughs.” As can be seen from Table 5, the fields in which the share of US corporate farms had a notable advantage were mainly concentrated in (1) nursery, greenhouse plants, horticultural flowers, and sod, and (2) aquatic products, accounting in 2012 for 20.43% and 18.67% respectively of the number of farms producing these types of agricultural products, obviously higher than the share of corporate farms in other agricultural product production. The fields in which the share of corporate farm agricultural product sales had a notable advantage were mainly concentrated in: (1) nursery, greenhouse plants, horticultural flowers, and sod; (2) aquatic products; (3) vegetables, melons, tomatoes, and sweet potatoes; (4) fruits, nuts, and berries; (5) Christmas trees and short-rotation woody plants; (6) pigs; (7) cattle and calves; (8) poultry and poultry eggs, etc. In the sales of the first 4 types of agricultural products, the shares of corporate farms reached 70.60%, 50.37%, 44.40%, and 40.11% respectively, exceeding the shares of family farms by 54.08, 30.05, 18.71, and 11.47 percentage points respectively. These fields often belong to facility agriculture, organic agriculture, and large-scale planting and breeding less affected by weather, and usually have a relatively high level of specialization and intensification, weaker seasonal influence, more controllable modern technology, and greater added value.

The main reasons why the operating fields of corporate farms were mainly concentrated in the above special aspects are as follows: First, compared with family farms, the operation of corporate farms often has a stronger profit orientation, and these fields mostly have higher income elasticity of demand and greater added value. Second, these fields often require more investment, newer development concepts, a higher level of technological application, and stronger capacity for industrial chain integration and connection to mid- and high-end markets. The larger the farm land scale, the stronger the demand for opening up financing channels and agricultural product markets, connecting with technology and mid- and high-end markets, and strengthening industrial chain integration, which causes the comparative advantages of corporate farms in capital, technology, development concepts, and industrial chain integration to become rapidly prominent. Third, relative to conventional agriculture, facility agriculture, organic agriculture, and large-scale planting and breeding less affected by weather can, through the large-scale integrated application of modern technology and development concepts, effectively avoid the constraints on corporate farms' ability to attract investment caused by factors such as the long agricultural production cycle, strong seasonality, and difficult-to-control risks. Because agriculture is the unity of economic reproduction and natural reproduction, agricultural development is constrained not only by market risks but also tested by natural risks; the current worldwide development of agricultural products toward energyization and financialization has also increased the difficulty of agricultural risk control.