Changing agriculture brings big business for foreign firms

For the last 20 days, Li Shihua, a large farmland operator in Bayan county, Northeast China's Heilongjiang Province, barely slept more than five hours a night. May was the planting season in Heilongjiang, one of the busiest periods in this area.

On typical day, Li and his wife would get up at half past three in the morning, spending long hours in the field working with other farmers to make sure everything from sowing and irrigation to fertilizing were done properly, before dragging their exhausted bodies home at 10 pm.

They had to help other farmers finish planting seedlings before the end of May. And if they missed the best season for sowing and planting, they would not get a good harvest in autumn.

Large-scale farming

Together with four partners, Li formed a large-scale farming entity in 2009 to operate farmland of around 17,000 mu (1,133 hectares) transferred or mortgaged from a dispersed group of farmers who either moved to cities to become migrant workers or farmers who did not want to cultivate land by themselves.

With such a large amount of land, Li found it necessary to employ modern agricultural technology to make the farming profitable.

DuPont unit Pioneer Hi-Bred was around to offer help.

Since the autumn of 2012, Li has worked with Pioneer Hi-Bred to increase the productivity of the land he operates. They upgraded the partnership in 2013 to a model where DuPont Pioneer directly provides a package of agricultural services ranging from sowing to selling grains.

Pioneer Hi-Bred, one of the world's largest seed companies, is now eyeing the opportunities arising from large-scale farming based on the platform of land circulation projects, targeting large farming entities or land operators like Li.

China unveiled a landmark land reform in November 2013, officially allowing collectively owned land to be transferred, rented or pooled. Previously, unlike urban land which is already being traded on the market, rural land, which was collectively owned, could not be traded and farmers only had the rights to use.

With the growth of China's urbanization, millions of farmers have moved to cities and towns to seek jobs and better pay, leaving their farmland unattended.

The new reform means farmers could legally transfer or mortgage the land-use rights to large-scale farming entities or even turn the rights into shares in these entities.

With land reform and land consolidation, new entrepreneurs are entering into the agricultural business. Individuals who have been working in other professions like education, property development or services are being attracted to agricultural business opportunities because enough land is now available to make it a viable and profitable business, Wiliam S Niebur, DuPont vice president, told the Global Times in an exclusive interview on May 29.

"So in Bayan county, we began to realize that those entrepreneurs needed information on seeds, information on how to grow the seeds, how to plant and harvest the grains from these seeds and information on how to market their grain," Niebur said.

DuPont began to offer large farming entities or land operators training and services on how to use the modern seeds and mechanical technologies as well as techniques for storage, irrigation and marketing.

Partnership benefits

"With the planter provided by DuPont, we can achieve the germination rate of over 95 percent," Li said.

Through the partnership with DuPont, Li said he has increased the yield by up to 150 kilograms per mu and income by 300 yuan ($47.97) per mu.

"The Bayan county model is really a view of the future we believe, a great example of modern China agriculture," Niebur said.

DuPont Pioneer is not the only multinational company to seize the opportunity from the rural land consolidation in the country.

Bayer CropScience, a unit of German chemical and pharmaceutical giant Bayer AG, launched a strategic partnership with China's CITIC Trust in December to provide technology and agricultural services on agricultural production and management for large-scale farming based on land circulation projects in East China's Anhui Province.

Bayer is currently operating three projects in the province and, as the technology partner, is providing technology and services for sowing seeds, harvesting, crop protection solutions on greenhouse crops as well as rice production solutions and trainings on farm management, Bayer said in an e-mail sent to the Global Times Thursday.

Question of control

The active involvement of foreign companies in China's land circulation projects and agricultural sector has sparked concerns about whether the domestic agricultural industry will be controled by foreign companies, putting the country's food security and safety in danger.

"Land circulation is all about the trading of the land use rights. As long as land ownership is not changed and foreign companies do not instigate farmers to plant other crops than grains, it is fine for foreign companies to get involved in the country's land circulation projects," Guo Qingbao, an analyst at Zhengzhou-based grain portal cngrain.com, told the Global Times Wednesday.

However, the active involvement of foreign companies in large-scale farming is ringing a warning bell to domestic agricultural firms, Ma Wenfeng, a senior analyst at Beijing Orient Agribusiness Consultant, told the Global Times on May 29.

So far few domestic seeds or agricultural firms have targeted packaged agricultural services for large-scale farming.

A staff member at a major domestic agricultural company Gansu Shengya Industrial (Group) Co, who declined to give his name, told the Global Times on May 29 that the company has not entered the field yet.

"Our research and development capacity is not adequate enough for us to venture into the area, but it should be the future trend," the staff member said.

China's seed companies are usually small and fragmented, preventing them from competing with their foreign counterparts in terms of R&D and service capabilities.

China will encourage mergers and acquisitions of domestic crop seed companies and support them to improve R&D, production, management and service capabilities to narrow their gaps with global leaders, Yu Xinrong, China's vice minister of agriculture, said at a press conference in May.

Domestic firms should not be short-sighted and only focus on planting crops and grains but should be active in offering packaged agricultural services to large-scale farming entities or land operators given the huge market potential, Ma said.

According to Ma's calculation, agricultural services surrounding corn planting across China reached 62 billion yuan in 2013, excluding services for fertilizers, seeds and pesticides, while profits from planting corns were only 6 billion yuan.

There are also concerns over whether foreign companies will sell in China genetically modified seeds, whose safety is hotly debated.

"In China, cultivation of genetically modified technology or corn is not allowed. We don't commercially sell any genetically modified corn in China to be compliant with the laws," Niebur said.

"As long as foreign companies obey China's regulations and there is no corruption in China's governments at all levels, there is no need to worry about it," Ma said.