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China Pushes Modern Farming as Tariffs Make U.S. Crops Costlier

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11/18/2018 | 12:15pm EDT

By Dominique Fong

YANGXIN COUNTY, China -- To keep bugs from spoiling her wheat and corn, Wei Junxia walks her plot of land spraying pesticide from a container on her back.

A neighbor uses an even simpler tool to boost production: a plastic tube jammed into a bag of fertilizer that she hoists over her shoulder.

The two women are among roughly 280 million people employed on farms in China, more than 100 times as many as in the U.S., according to government figures. Chinese agriculture is dominated by small farms with low crop yields; the average Chinese farm is less than two acres, according to experts -- a stark contrast with 400 acres in the U.S.

But the trade dispute between the U.S. and China is giving Beijing fresh motivation to make the country's farms more efficient. China has imposed tariffs on American soybeans, wheat and other crops in retaliation for U.S. tariffs on Chinese goods, making those imported crops more expensive and highlighting the country's dependence on foreign growers.

"The trade war is definitely adding pressure and adding scrutiny," said Even Rogers Pay, an agriculture analyst at Beijing-based research firm China Policy. "Top officials in the [Communist] Party are particularly paying attention to agriculture."

In August, a month after both countries' tariffs took effect, China's Ministry of Agriculture and Rural Affairs said it would build 254 "strong agricultural industrial towns" as models for the country.

President Xi Jinping toured large-scale farms in fertile northeastern Heilongjiang province in September to drive home the message that increased domestic production of staple foods such as grain can help bolster China's economy amid the trade war.

"Unilateralism and trade protectionism are rising, forcing us to take the road of self reliance," Mr. Xi said, according to official state media. "This is not a bad thing. China ultimately depends on itself."

Chinese officials have long called for modernizing agriculture, and consolidating farms and expanding use of modern machinery have boosted production in some areas. China now exports some agricultural products, such as rice.

But the effect has been limited -- the yield per hectare for soybeans in the U.S. is nearly double that in China, according to United Nations data.

The limited effect is in part because Beijing wants to maintain social stability at all costs and large-scale mechanized farming would likely eliminate many jobs in rural areas, where resistance to change has been strong.

The state retains ownership of all land in China, and farmers merely have the right to use it, which makes farmers less willing to make long-term investments.

At the same time, it can be risky for farmers to rent their land-use rights to others, which is one potential route to consolidation. Sometimes they can secure a job on the farm as part of a deal, or get local subsidies. Yet often such concessions aren't enough and they end up roving from place to place looking for migrant work.

Now, however, China's slowing economy has led the government to target rural areas for development as options dwindle in heavily built-up cities.

In September, China's cabinet, the State Council, unveiled a five-year plan to raise farm productivity and increase rural incomes, among other goals. Upgrading farm machine and equipment is one of the 10 goals in a separate "Made in China 2025" plan.

Many experts believe the government is likely to lift China's ban on genetically modified seeds following last year's $43 billion acquisition of Swiss seed company Syngenta by state-owned enterprise ChemChina. That could make it easier for farmers to boost crop yields.

And China's aging population is increasing the pressure to modernize the sector, as many young Chinese people don't want to work in agriculture, in part because inefficient operations keep farm incomes low, said Colin Carter, a University of California, Davis professor who studies China's agricultural development.

"There's a saying for Chinese kids, 'You'd better study hard, or else you'll end up working in the fields,'" said Liu Jiahuan, 25, a graduate student in agriculture who is doing research in the Dahan Village area of Yangxin County.

In September, China said it would partner with Asian Development Bank to provide $6 billion of loans, grants and equity investments to fund a checklist of development projects in rural areas, including modernizing agriculture.

Yangxin County, in China's coastal Shandong province, illustrates both the past and possible future of Chinese agriculture.

While Ms. Wei and others like her still work small plots of land -- generally an acre or less, about the size of a football field -- Zhang Fengxia cobbled together an 8,200-acre wheat-and-corn farming operation by leasing land-use rights, a process that accelerated in 2014.

Ms. Zhang said her crop yields have risen 43% over the past four years. Scaling up allowed her to invest in modern farming equipment, including planting machines and pesticide-spraying drones. She distributes a portion of profits to farmers who provided the land.

"If we're successful, then I hope others can copy our model in the rest of the country," Ms. Zhang said.

--Lin Zhu and Fanfan Wang contributed to this article.

Write to Dominique Fong at Dominique.Fong@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
CORN FUTURES (C) - CBR (FLOOR)/C1 -1.76% 334.75 End-of-day quote.-10.77%
ROUGH RICE FUTURES (ZR) - CBE (ELECTRONIC)/C1 0.36% 14.085 End-of-day quote.6.36%
SOYBEAN MEAL FUTURES (ZM) - CBE (ELECTRONIC)/C1 -2.12% 314.7 End-of-day quote.7.74%
WHEAT FUTURES (W) - CBR (FLOOR)/C1 -3.25% 550.25 End-of-day quote.2.24%
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