Mechanization of agriculture will help improve grain yields in China

Despite the small landholdings, large land fragmentation and rising labor costs, agricultural production in China has steadily increased in the past several decades. When discussing agricultural production, most analysts tend to devote their attention to conventional inputs, such as fertilizer, irrigation and seeds, but often ignore the quiet mechanization revolution that has been taking place lately in China.

As shown in a recent paper by the author and two other two agricultural professors, Yang Jin and Wang Shenglin, published in China Economic Review, China has entered an era of labor shortage, passing the so called "Lewis turning point". The real wages in both rural and urban areas have grown at a double-digit rate since 2004. As labor becomes more expensive, it is no longer profitable for farmers to primarily rely on manpower for agricultural production. Instead, they start to use more machinery in place of labor.

However, it does not make economic sense for each of them to own agricultural machinery because of the high initial investment and short production season. In response, a new structure of mechanization service provision has emerged. Tens of thousands of private mechanization service providers travel throughout the country to harvest crops at very competitive prices.

Amazingly, most of the service providers are concentrated only in a few counties. The clusters provide many necessary services, such as repairing, information exchange, collective bargaining and security. The institutional arrangement enables the specialized mechanization service providers to drive their trucks carrying combine harvesters throughout China for up to eight months to chase harvest seasons.

The scale economy of an extended working period greatly lowers the unit cost, making agricultural mechanization services more affordable.

Both central and local governments have played an instrumental role in facilitating agricultural mechanization. Since 2004, the central government has provided subsidies for the purchase of agricultural machinery and waived all highway tolls for trucks carrying agricultural machinery.

At the local level, business associations have been established to facilitate market information exchange and route planning. The local government has offered free inspection of agricultural machinery before the harvest season starts.

It is well known that mechanization is not equally applicable to all crops. For example, it is much easier to use machinery to harvest wheat than corn. As a matter of fact, more than 90 percent of wheat and rice are harvested by machinery in China. As wages keep rising, it may be too costly for farmers to plant corn relative to wheat in the near future, particularly in slope areas where mechanization is less likely. The rising demand for corn and labor cost mean China either has to import more corn or adapt combine harvesters to the Chinese environment of small lots and diversified varieties.

In fact, both are occurring - China is importing a record amount of corn and factories that produce indigenous corn combine harvesters have grown in number.

As the domestic mechanization markets for wheat and rice approach saturation, there is a large scope for the agricultural machinery industry to go abroad, in particular to the land-abundant sub-Saharan African countries. Seasonality is a key feature of agricultural production, even for smallholder farming. During the busy season, labor shortages pose a chronic constraint, even in many developing countries that are marked by surplus labor in lean seasons. Because of labor shortage during peak seasons, farmers in sub-Saharan Africa often cannot cultivate all the land available. If mechanization can help overcome the bottleneck, Africa will see a dramatic increase in cropping areas and total grain output. A more food secure Africa will be good for China's food security as China can import some food from Africa to reduce domestic land pressures.

Because China's agricultural machinery has been developed to meet the needs of smallholder farmers, in general they are cheaper, more durable and easier to repair. Therefore, the Chinese agricultural machinery may be particularly suitable to other developing countries.

Expanding the scale of mechanization might be a more daunting challenge than simply exporting agricultural machinery. The Chinese experience suggests that the revolution of agricultural mechanization could potentially happen in sub-Saharan African countries that are dominated by smallholding farmers.

The author is a senior researcher at the International Food Policy Research Institute and a co-editor of China Economic Review, the official journal of the Chinese Economists Society.

(China Daily 03/30/2012 page7)