What will change the landscape of Chinese agriculture?
China now wants to lower grain prices. On the surface, it looks like an attempt to align with international prices and solve the huge gap between domestic and foreign grain prices, but it is not that simple. The state has laid out a grand plan. Lowering grain prices can trigger a chain of reactions, and this series of arrangements will change the whole of Chinese agriculture.
Let's look at how China's agriculture and your life will change.
Promoting urbanisation: a large number of farmers are forced into cities
If China wants to develop, it must urbanise on a large scale in order to change its status as a major agricultural country, and the premise of urbanisation is that a large number of farmers move into cities. If grain prices remain high, as a farmer, would you be willing to leave your own land?
The answer is no.
Soybean prices have fallen, and corn prices have fallen sharply. You and the farmers around you all feel this: farming no longer makes money, and it is better to work for wages, which brings money faster. Moreover, China's rice and wheat prices are both going to be lowered, so for these scattered smallholders, farming does not make money.
Once farming no longer makes money, farmers have no choice but to transfer their land and go to the cities to seek a living, which indirectly speeds up the urbanisation process. In the process of moving to the cities, it appears that farmers do so voluntarily, but in fact it is because lower grain prices have reduced their returns, forcing them into the cities.
Moderate-scale agricultural operation will be achieved
If agriculture is to develop, it must achieve moderate-scale operation in order to improve competitiveness, reduce costs and realise economies of scale.
China first mentioned moderate-scale operation as early as 1987, not just in recent years, but judging by the results, it has not worked very well.
Why?
It is precisely because grain prices were too high and farmers' returns were fairly good, so no one was willing to give up their land, making it hard for land to be consolidated into scale.
Now that grain prices have been lowered, scattered farmers cannot make money from farming. Just as they are forced into the cities, they are forced to give up their land, and this land slowly transfers to the hands of those who know how to farm. These people can make money through high and new technology, and once the land reaches scale, it will reduce costs and increase planting returns, gradually forming moderate-scale operation.
Capital will enter agriculture, promoting agricultural development
If an industry has no capital to drive it, it is very hard for it to develop rapidly. Capital chases profit and knows how to use the least money to create the greatest returns.
Yet it is very difficult for agricultural capital to enter China precisely because it is too scattered; the cost of capital entering is too high and too troublesome.
Once land reaches scale, the cost of capital entering drops a great deal. Previously capital had to face 100 farmers, but now it only needs to face 10 farmers, and it is easier to reach an agreement. Once capital can enter easily, it will drive agricultural development and create greater profits.
Promoting destocking of real estate
The pressure of destocking real estate is not much less than that of destocking grain. The groups in the cities are only so many people, and their purchasing power is only so much, and now the state's intention leans towards letting farmers take over this stock.
After farmers enter the cities, although they will not all buy homes, a portion of them certainly will, which can speed up real estate sales in third- and fourth-tier cities.
Providing cities with a large, stable and cheap labour force
In the past, rural labourers would also go to the cities to work in their spare time, but it was not very stable. Once farmers give up their land and enter the cities, however, they become full-time cheap labour, thereby lowering the labour costs of manufacturing enterprises and generating greater profits.
But this link is a double-edged sword. The key lies in whether employment can be fully arranged. If this problem can be solved, it will produce a "demographic dividend", but if employment placement works poorly, it will bring a huge social burden.