China’s New-Age Small Farms and Their Vertical Integration: Agribusiness or Co-ops?

Abstract

The future of Chinese agriculture lies not with large mechanized farms but with small capital-labor dual intensifying family farms for livestock-poultry-fish raising and vegetable-fruit cultivation. Chinese food consumption patterns have been changing from the old 8:1:1 pattern of 8 parts grain, 1 part meat, and 1 part vegetables to a 4:3:3 pattern, with a corresponding transformation in agricultural structure. Small family-farming is better suited for the new-age agriculture, including organic farming, than large-scale mechanized farming, because of the intensive, incremental, and variegated hand labor involved, not readily open to economies of scale, though compatible with economies of scope. It is also better suited to the realities of severe population pressure on land. But it requires vertical integration from cultivation to processing to marketing, albeit without horizontal integration for farming. It is against such a background that co-ops have arisen spontaneously for integrating small farms with processing and marketing. The Chinese government, however, has been supporting aggressively capitalistic agribusinesses as the preferred mode of vertical integration. At present, Chinese agriculture is poised at a crossroads, with the future organizational mode for vertical integration as yet uncertain.