Grain-growing enthusiasm dampened: why are new rural business entities breaking contracts and returning land?
Recently, reporters from Outlook Newsweek, investigating in major grain-producing areas such as Heilongjiang, Jiangsu and Henan, found that due to multiple factors including falling grain prices, natural disasters and persistently high land transfer fees, some family farms, large grain growers and cooperatives and other new business entities are facing losses, their enthusiasm for growing grain has been dampened, and the phenomenon of "breaking contracts and returning land" is playing out in many places. At present, many new business entities are in a state of indecision and confusion, and farmers and large grain growers are locked in a contest over land transfer prices.
In response to the phenomenon of new business entities "breaking contracts and returning land", the grassroots officials and experts interviewed generally worry that, against the backdrop of grain prices being difficult to improve and planting returns shrinking markedly, this phenomenon may increase noticeably. This deals a blow to the land transfer and large-scale agricultural operations currently under way, also brings hidden dangers to national food security, and may trigger land transfer disputes and intensify conflicts between operators and contracted households.
They suggest that great attention should be paid to this, and recommend further improving the risk prevention and control mechanism for large-scale operations, and implementing a new mechanism for forming land transfer prices, to prevent the phenomenon of new business entities "breaking contracts and returning land" from spreading.
"Breaking contracts and returning land" plays out in many places
"Looking at it now, the corn market is even worse than expected at spring plowing; fortunately I didn't transfer so much land, otherwise I'd have lost even more." As the autumn harvest approaches, Wang Yuelong, chairman of the Hatun Modern Corn Farm Machinery Cooperative in Yanjiang Township, Sunwu County, Heilongjiang, told Outlook Newsweek reporters that he felt very fortunate to have returned the 18,000 mu of dry farmland he had transferred this spring plowing. Last year the cooperative signed whole-village transfer agreements with three local villages, and the contracts do not expire until next year; because land transfer prices were high, Wang Yuelong "painfully" stopped transferring land.
Those "breaking contracts and returning land" like Wang Yuelong are not an isolated phenomenon. In Jiangsu Province, due to the outbreak of fusarium head blight in this year's summer grain, continuous rain that caused rotten wheat in the fields, and falling grain purchase prices, reduced output and income among large grain growers was fairly widespread, and in some places new business entities abandoned their fields and stopped planting. The person in charge of the agricultural service center of Changsha Town, Rudong County, Jiangsu, reported that 10 large grain growers in Siqiao Village had transferred more than 2,500 mu of land, and recently these large growers collectively submitted reports to the village committee demanding to return the transferred land.
"Now we have to see how the autumn grain turns out; if it can't make up for the loss on summer grain, I won't do it anymore." Fan Hongqi, a large grain grower in Yingxin Village, Xiaoji Town, Jiangdu District, Yangzhou, Jiangsu, told this publication that last year he increased his transferred land from 50 mu to 180 mu, with a transfer fee of 800 yuan per mu, never expecting that because of weather conditions and falling grain prices, this year's summer grain output and income would fall. "If it really doesn't work, I'll have to return the land and stop transferring it."
In Henan, widespread rainfall during this year's wheat harvest affected 630,000 mu of farmland. This rare rainy weather severely affected wheat quality in Henan's premium wheat-producing areas, and farmers and large grain growers in parts of northern Henan suffered serious losses. Fan Zhenyong, head of the Xianhepo Planting Farmers Cooperative in Xinxiang City, told this publication that he had transferred more than 2,000 mu of land, and the annual cost of transferring land alone was more than 400,000. The losses from this disaster totaled more than 1 million yuan. This year he decided to return the land, saying "I definitely can't transfer this much again."
This publication's research found that at present many new agricultural business entities are in a state of indecision, wait-and-see, or even confusion, and have intentions to return land, with their enthusiasm for growing grain severely affected.
A blow to large-scale agricultural operations
Relevant experts told Outlook Newsweek reporters that because new business entities have suffered relatively large losses, "breaking contracts and returning land" and even the phenomenon of "absconding" occurring in some areas will increase. This is very likely to deal a blow to the process of large-scale agricultural operations, and may even trigger a slump in grain production.
First, losses for new business entities may become the norm.
Fu Taihua, a large grain grower in Fuzhuang Village, Xun County, Henan, transferred more than 10,000 mu of land this year, growing mainly wheat as summer grain and mainly corn as autumn grain. He calculated an account for this publication: this year wheat and corn yields per mu were 1,000 jin and 1,200 jin respectively, the local average selling price of wheat was 0.95 yuan/jin, and the current corn price was only 0.7 yuan/jin, so the annual income per mu came to 1,790 yuan; after deducting the contracting fee of 850 yuan and the inputs of 1,050 yuan for two seasons of agricultural materials, irrigation and labor, there was still a loss of 110 yuan.
The Cost Division of the Taizhou Price Bureau in Jiangsu investigated and compared the wheat costs and returns of 39 surveyed farming households at agricultural cost survey points in its jurisdiction of Xinghua City, Jingjiang City, Taixing City and Jiangyan District, among which 10 households had planting areas of more than 100 mu. The survey showed that the average net profit per mu of large-scale growers was a loss of 478.06 yuan, 60.7% higher than the loss of 297.49 yuan for ordinary growers. According to a survey by the Agricultural and Workers Office of the Yangzhou Municipal Party Committee, in the first half of the year more than half of the city's large grain growers suffered losses.
Second, the phenomenon of "breaking contracts and returning land" may increase.
Yan Zhongjie, Party branch secretary of Zihe Village, Erjing Town, Bei'an City, Heilongjiang, and Wu Desheng, deputy township head of Yanjiang Township, Sunwu County, said that land transfer agreements signed between large grain growers, cooperatives and farmers are mostly for 3 to 5 years, and that with grain-growing returns not guaranteed, the phenomenon of "breaking contracts and returning land" will likely worsen next year.
Ma Deyun, director of the Agriculture Bureau of the Jiangsu Provincial Agricultural Committee, believes that "breaking contracts and returning land" is not yet widespread, which is also related to the greater number of natural disasters this year. But many large grain growers are watching and waiting, and if this year's autumn grain still cannot make up for the summer grain losses, the "absconding" phenomenon may increase.
Third, the process of agricultural large-scale operations is being dealt a blow.
"If a local like me with machinery loses money growing grain, then if someone else takes over, they won't be able to make money either." Fan Hongqi said. The grassroots officials interviewed generally worry that when grain prices fall and a bumper harvest does not bring a bumper income, those who suffer first are the large grain growers and cooperatives, whose enthusiasm is dampened, and the phenomenon of "breaking contracts and returning land" may transmit negative effects into the land transfer and large-scale operations currently under way, slowing the process of agricultural large-scale operations and possibly even triggering a slump in grain production.
Rising disputes affect grassroots credibility
Experts believe that, in addition to the blow to the process of agricultural large-scale operations, the phenomenon of "breaking contracts and returning land" also affects rural economic development and social stability.
On the one hand, conflicts between operators and contracted households are increasingly emerging. Outlook Newsweek reporters found in grassroots investigations that rural land transfer is carried out according to the principles of "lawfulness, voluntariness and compensation", with both parties signing land transfer contracts. In previous years grain-growing returns were still acceptable and business entities still had certain returns. At present, because grain prices are sluggish and transfer terms are too long, business entities that have lost money want to "break the contract", while farmers are unwilling to "break the contract"; the contradiction between "breaking" and "not breaking" not only constrains rural economic development but also brings factors of social instability, and land transfer disputes will increase.
Zihe Village, Erjing Town, Bei'an City, Heilongjiang, has a total of 33,000 mu of arable land and a population of 4,964, and at present the whole village's arable land has been transferred to 5 large growers, while most other farmers have gone out to work. "If the transfer price drops to a level acceptable to the large growers, the farming households won't agree; at a price in line with the farming households' wishes, the large grain growers won't accept it." Yan Zhongjie said that if the previously signed contracts are not executed, transfer disputes will intensify. A farmer in the village who transferred out his land said that he had signed a three-year contract with a large grower at 450 yuan per mu, and "it's only the second year this year, and the large grower wants to drop it to 300 yuan per mu. How could I agree to that? Not following the contract is a breach."
On the other hand, it affects the credibility of rural grassroots organizations.
This publication's interviews in many places found that because large-scale land operations involve many contracted farming households and negotiating and signing contracts one household at a time is too much work, in many places village-level organizations and village officials come forward to organize bidding, negotiations and signing, achieving transfers of whole groups and whole villages. At present, as new business entities want to terminate leases, the masses direct their "resentment" at grassroots organizations.
Some large grain growers and grassroots officials in Jiangsu frankly admitted that whenever reducing transfer fees is mentioned, some farming households say to the village officials, "You were the ones who wanted us to transfer the land in the first place; when the large growers made money they said nothing, and when they lose money they want to cut the rent. How can a contract be changed just whenever you want?" Wu Zhiming, a large grain grower in Luocun Village, Xuebu Town, Jintan District, Changzhou City, said that a few years ago, after discussions with village officials, transfer contracts were signed uniformly, and this year he wanted to negotiate a rent reduction; after the village officials raised it, the farmers were unwilling, leaving him in a very awkward position. The rent could not be reduced, and if he kept planting, "the losses would really be unbearable."