China’s Big Grain Farmers Offer to Split Profits With Land Owners as Rents Soar
Shao Haipeng
DATE:  Jun 29 2022
/ SOURCE:  Yicai
China’s Big Grain Farmers Offer to Split Profits With Land Owners as Rents Soar China’s Big Grain Farmers Offer to Split Profits With Land Owners as Rents Soar

(Yicai Global) June 29 -- Some large-scale grain farmers in China are trying out a new profit distribution payment method to cut land rent costs which are becoming unaffordable, a cooperative owner told Yicai Global.

Wang Han runs a cooperative in eastern Anhui province that plants alternate crops of wheat and corn on 20,000 mu, equivalent to 1,333 hectares, of land each year. Large-scale farmers like Wang plant on land that is owned by a number of small farmers and aim to profit from economy of scale operations. 

Rural land in China is owned collectively by farmers and based on the rural land management rights act of 2008, land owners can transfer the farming rights to others in the form of a lease. Fourteen years ago, landlords charged a nominal rent of no more than CNY0.45 (USD0.07) per square meter a year. But since then, large-scale grain farming has emerged and rents have almost tripled. 

Wang’s cooperative earned CNY2,017 (USD301) per mu or CNY3 (USD0.45) per sqm from its grain sales last year, but planting costs were about half of that, he told Yicai Global. If land rents go up to CNY1.28 per sqm, Wang's profit margin will be very small and he will lose money if grain prices should fall. The highest rent his cooperative can afford to pay is CNY1.20 per sqm, he added.

Land rents have been rising in recent years because of the surging grain prices, which coupled with ample government subsidies, drives up demand for land, Dong Qiang, a professor at the School of Humanities and Development at China Agricultural University, told Yicai Global.

High land rents are a drag on the competitiveness of China’s agriculture, Wang said. If the cost of leasing land is ruled out, the country’s wheat planting costs would be lower than the price of imported wheat, he added.

In response to the shrinking margins, Wang’s cooperative is experimenting with a new approach that gives land leasers a stake in the cooperative and a share of any profit from the harvest. They will also receive a fixed rent of CNY1.20 per square meter. In this way Wang can spread the risk and stabilize his land leasing costs.

Land rents in China vary from place to place depending on the different soil and geological conditions, said Lin Guofa, research director of BRIC Suzhou Agricultural Information Technology’s bulk farm produce e-commerce platform 16988. Farmland in northern China is generally between CNY0.90 and CNY1.20 per square meter a year. In the northeast it is between CNY0.60 and CNY0.90 and in the south it ranges from CNY0.45 to CNY1.80.

Editors: Tang Shihua, Kim Taylor

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Keywords:   Rent for Land,Grain Planting,Agricultural Producers' Cooperative,Industry Analysis