No. 1 Central Document Is About to Be Issued, Modern Agriculture Is Expected to Receive Comprehensive Support
As the 2015 No. 1 Central Document of the Central Government draws ever closer, the practice being tested in many places of "farmers contributing land management rights as equity stakes in cooperatives and leading enterprises" will receive comprehensive "top-down" support in 2015.
The reporter recently learned that the policy phrase of the 2015 No. 1 Central Document regarding the new type of agricultural operation system is "accelerate the building of," and under this goal it will promote the construction of agricultural industrialization demonstration bases and the transformation and upgrading of leading enterprises, innovate the methods of land transfer and scaled operation, guide farmers to contribute land management rights as equity stakes in cooperatives and leading enterprises, and encourage industrial and commercial capital to develop crop cultivation and livestock breeding suited to enterprise-style operation, agricultural product processing and distribution, and agricultural socialized services.
"Land management rights contributed as equity stakes in cooperatives and leading enterprises are a direction consistent with the spirit of the Third Plenary Session of the 18th Central Committee, but previously this was only carried out locally; this is the first time it is being rolled out in a 'top-down' manner." An official from the Ministry of Agriculture told the reporter, "According to convention, specific operational documents will follow the No. 1 Central Document."
Survey Says Farmers' Enthusiasm Is Not High
The practice of contributing land management rights as equity stakes in cooperatives and leading enterprises had already been carried out in many places across the country. In local practices, both local governments and enterprises have maintained relatively high enthusiasm for land management rights being contributed as equity stakes. In June 2014, Jinshan District of Shanghai, in its "Several Opinions on Deepening Agricultural and Rural Reform," proposed exploring new operating methods for rural land management rights contributed as equity stakes, to ensure that farmers obtain higher and more sustainable returns from the land.
However, a survey conducted by the Agriculture Committee of Suzhou City, Anhui Province, showed that regarding farmers contributing land management rights as equity stakes, agricultural enterprises, cooperatives and other industrialized operation organizations have strong willingness, while farmers' enthusiasm for participation is generally not high.
Li Guoxiang, a researcher at the Rural Development Institute of the Chinese Academy of Social Sciences, told the Daily Economic News reporter that the method of contributing land management rights as equity stakes helps develop large-scale agricultural production, improve the efficiency of land allocation and utilization, and enable farmers to benefit in secondary distribution. However, in many places, farmers are unwilling to get involved in this method of contributing land management rights as equity stakes and becoming shareholders.
"Although farmers can receive dividends through this method, risks go hand in hand with it." In Li Guoxiang's view, if problems arise in the operation of the cooperative or leading enterprise, farmers will also bear risks according to their equity shares, that is, sharing risks together; whereas if it is simply transferring land to collect rent, farmers feel much more secure.
Li Guoxiang explained that when an enterprise or new type of operating entity leases or transfers land, it needs to pay rent to farmers first, while contributing land management rights as equity stakes means dividends are paid after profits are made. In this way, for the cooperative or leading enterprise, it can save upfront capital investment, ease funding pressure, and also mobilize the enthusiasm of farmer-shareholders to participate in industrialized operation. But farmers prefer a guaranteed minimum land rent income rather than equity dividends that are hard to determine under market risk.
Awaiting Policy Drive
The reporter learned that under the effect of multiple operational difficulties, contributing land management rights as equity stakes is currently in a window period of "still needing policy drive."
"Contributing land management rights as equity stakes has already emerged in many places, mostly in developed areas and places with 'capable people,' but the proportion is still not large at present. According to our survey, multiple operational difficulties still exist." Li Guoxiang told the reporter, "First, for this 'joint-stock company,' since it is going to operate, it requires relatively high management capability, but there are not many farmers and village officials with market savvy and operational qualities; second, after contributing equity stakes, how to operate - direct operation by oneself, transferring out, or hiring a CEO? Shareholding farmers easily have differing opinions, and it is hard to unify them; finally, leading enterprises are very powerful, and farmers' land management rights can actually only account for a very small proportion. For such enterprises, contributing equity stakes and operating are relatively troublesome matters."
In the experiment in Jinshan District of Shanghai, because the pilot town of Langxia had the participation of leading enterprises with high investment and high returns, it was relatively difficult to determine the proportion of farmers' land management rights contributed as equity stakes; while another pilot, Zhangyan Town, adopted a collective farm model, with all returns belonging to farmers, operated on the basis of 1 mu as 1 share, and thus was relatively easy for farmers to accept.
From the perspective of land use, Tan Mingzhi, an engineer at the Land Consolidation Center of the Ministry of Land and Resources, believes that farmland being contributed as equity stakes involves issues in all aspects, including agricultural operation, village governance, and benefit distribution. If one starts merely from solving agricultural operation problems, hidden dangers will inevitably be left. Once the value carried by land is no longer limited to agricultural production, all kinds of interest disputes centered on the collective will emerge one after another.
Regarding this, the above-mentioned official from the Ministry of Agriculture held a relatively optimistic attitude. He said, "The role of policy is to guide land management rights to be contributed as equity stakes in cooperatives and leading enterprises, but after any policy is issued there will be a certain buffer period and adaptation period. Its implementation methods will certainly be of many types. Driven by the market, how can the use of land management rights achieve the optimum? We must believe that farmers and enterprises will certainly make the choice most in line with their own interests." (Daily Economic News)
Focus on Two Main Lines
The Modern Agriculture Sector Is Expected to Rise
The pilot reform of the agricultural product price system is expected to be further expanded, in addition to the continuation of existing trial varieties and regions. The target price reform pilot first proposed by the central government this year is an important measure to improve China's agricultural product price formation mechanism. The so-called target price system refers to the government setting a target price for agricultural products: when the actual market price is higher than the target price, low-income consumers are subsidized; when the market price is lower than the target price, producers are subsidized according to the price difference. At the present stage, the price formation of the vast majority of China's agricultural products follows the market mechanism, allowing supply and demand relationships to be reflected in the market so as to form product prices, which is also the general mechanism of price formation under market economy conditions. At present, the government mainly intervenes in the prices of six important varieties, namely wheat, rice, corn, soybeans, cotton and sugar. Further expansion of the pilot reform of the agricultural product price system will directly benefit the long-term development of leading companies in the industry. For example, Guangxi currently has a serious inversion of sugar prices, and large-scale production cuts may occur later. Sugar production cuts and the expansion of the price reform pilot will drive sugar prices upward, thereby promoting a recovery in the performance of sugar enterprises. In addition, related targets for several other major agricultural products - cotton, rice, soybeans and corn - will also benefit.