How agricultural modernization is achieved through service scale

Under the constraint that farm household operation scale is difficult to expand substantially, Chinese agriculture will rely more mainly on the expansion of the scale of services in all segments of agriculture and the improvement of service levels to achieve agricultural economies of scale and enhance the competitiveness of the agricultural industry.

In recent years, with major changes in the national economic structure and the acceleration of urbanization, China's agricultural development model is undergoing a major transformation. Rising agricultural labor costs have induced changes in the mode of agricultural input, mainly manifested as reduced agricultural labor input and increased machinery input, while agricultural productivity is transitioning from mainly improving land productivity to mainly improving labor productivity.

At the same time, institutional arrangements for agricultural operations are also changing. In some areas, land transfer has accelerated, operation scale has shown a trend of expansion, and operating entities and operating methods have become diversified.

However, overall, the expansion of China's agricultural production scale is subject to the dual constraints of the endowment of land and population resources and the pattern of population urbanization, and the potential for expanding farmland operation scale is limited. Assuming that by 2020 all 260 million migrant workers can be fully integrated into cities and towns, and their land can be transferred in a market-based manner, rural per capita arable land would still be less than 5 mu. Moreover, excessively expanding production scale violates the factor endowment characteristics of Chinese agriculture and would instead lead to distortion of the factor structure and a decline in agricultural productivity.

Therefore, I believe that relying solely on expanding farmland scale is not an optional policy tool for promoting the transformation of China's agricultural development model. In China's exploration of agricultural modernization, the Shandong Supply and Marketing Cooperative is blazing a path to agricultural modernization centered on service scale.

Agriculture is a typical industry that relies on multiple factors to provide products. In addition to traditional factor inputs such as land and labor, it also relies on modern factor inputs such as agricultural machinery, pesticides, and chemical fertilizers, as well as services in all pre-production, mid-production, and post-production segments of agricultural production. International experience shows that service scale and specialization are important hallmarks of agricultural modernization. Western developed countries all have a relatively high proportion of population engaged in agricultural services. In the United States, the agricultural population accounts for only 2% of the national population, while the population in service industries serving agriculture accounts for as much as 17%-20% of the national population, with each farmer on average served by eight to ten people.

The economies-of-scale effect of agriculture must be realized through optimizing factor combinations, rather than simply increasing production scale. Under the constraint that farm household operation scale is difficult to expand substantially, Chinese agriculture will rely more mainly on the expansion of the scale of services in all segments of agriculture and the improvement of service levels to achieve agricultural economies of scale and enhance the competitiveness of the agricultural industry.

Judging from recent practices in various places, most service segments of agricultural production, from traditional agricultural input supply, agricultural machinery tillage, crop sowing and harvesting, and unified prevention and control, to improved seed promotion, soil testing and fertilizer blending, and technical training, and further to agricultural product storage, logistics, and sales, are all suitable for large-scale centralized supply.

First, these segments generally have strong homogeneity, a high degree of standardization, and are easy to supervise, making them suitable for large-scale supply methods; second, some of these segments, such as the procurement of seeds, chemical fertilizers, and pesticides, and pest and disease control, have strong externalities, and contiguous centralized service provision can reduce external diseconomies; third, some segments have strong asset indivisibility, such as large agricultural machinery, drying equipment, and cold-chain storage facilities. Expanding service scale can reduce uneconomic investment and idle assets of individual households or dispersed service providers, and can also enhance mutual coordination among service segments; fourth, these segments place high demands on the specialization and organizational capacity of service providers. If capacity in this regard cannot keep up, the potential for economies of scale in service segments will also be difficult to realize.

Advancing service scale with land trusteeship as the entry point is an active practice of the Shandong Supply and Marketing Cooperative that focuses on changes in agricultural production methods and organizational methods to solve the current problems of "who will farm the land" and "how to farm the land." It can link scattered land-operating entities through services, objectively creating economies of scale in contiguous land and machinery operations; it handles well the matters that individual households cannot handle or cannot handle well, such as farmland consolidation, deep mechanical plowing, agricultural technology promotion, animal and plant disease prevention and control, agricultural product sales, and "aerial control" operations for pests and diseases, thereby reducing labor intensity while improving efficiency and benefits; for some households unable to cultivate land or lacking labor, it implements "nanny-style" and "menu-style" services through land trusteeship and surrogate cultivation, effectively solving problems such as idle arable land and extensive management. At the same time, it effectively solves the "last mile" problem in the promotion of agricultural science and technology. Services have also expanded and extended into fields such as post-production storage, processing, sales, and brand cultivation, forming whole-industry-chain services across pre-production, mid-production, and post-production, and the comprehensive benefits of agricultural production have been improved as never before.

Starting from the endowment conditions of various agricultural factors in China and combining them with the existing institutional system, while maintaining farm households as the basic unit of agricultural production, the potential for advancing agricultural service scale is enormous and should be the main direction and focus of China's agricultural modernization in the future.