impact of demographic change on agricultural mechanization: farmers’ adaptation and implication...

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Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy NSD/IFPRI Conference on MECHANIZATION AND AGRICULTURAL TRANSFORMATION IN ASIA AND AFRICA June. 16-18, 2014 Peking University, Beijing, China Zhong Funing Nanjing Agricultural University

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"Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy" presented by Zhong Funing at NSD/IFPRI workshop on "Mechanization and Agricultural Transformation in Asia and Africa", June 17-18, 2014, Beijing, China

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Page 1: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Impact of demographic change on agricultural mechanization: farmers’

adaptation and implication for public policy

NSD/IFPRI Conference on MECHANIZATION AND AGRICULTURAL TRANSFORMATION IN ASIA AND AFRICA

June. 16-18, 2014 Peking University, Beijing, China

Zhong Funing

Nanjing Agricultural University

Page 2: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Introduction

China has experienced the “largest peaceful migration in human history” since the reform, which greatly contributed to economic growth, urbanization, and farmers’ income as well.

How about the impacts on the long-run & sustainable growth in agriculture, especially structures among regions? What technology innovation is needed in adapting to the demographic change? What is the implications to public policy?

Page 3: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Introduction

Declining share of rural labor force: from 70.5% in 1978 to 34.8% in 2011, implying 273 millions moved out

Agricultural Production: Agricultural GDP: +4.56% per year; Grain production: +1.6% per year; Shift of grain production to more labor intensive vegetables

Explanation and future challenge? Demographic change in rural China; Farmers’ adaptation to demographic change

Page 4: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Demographic change in rural China

Despite significant declines in the shares of rural population and labor force, the absolute number of rural labor force did not reduce. Number or laborers per household increased from 2.45 in 1980 to 2.78 in 2011, and arable land per capita only slightly increased from 2.17 mu in 1995 to 2.30 mu in 2011, implying no change in land/labor ratio.

Page 5: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Demographic change in rural China

Despite labor input per unit of sown area is about 5 times high in vegetable production, its total sown area has increased from 3 to almost 20 million hectares, with its share in total crop area increased from 2 to 12 %, implying no definite and absolute shortage in labor supply.

Page 6: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Demographic change in rural China

Based on our village-wide survey (covering 121 counties, 203 villages, 7317 households and 28,021 persons in 5 provinces with big population and out migrants) , 80% of young laborers aged between 20-30 of age have left home.

Page 7: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Demographic change in rural China

Among the 9279 working-age persons staying at home more than 10 months a year, only about 1/3 are primarily engaged in agriculture; Among those primarily engaged in agriculture, only 13.8% are under 35 while 58.8% are over 45. So the basic issues are likely to be aging of rural laborers at present, and rapid shringking in the future as a result.

agefarm non-farm both No-work total

No. % No. % No. % No. % No. %

16-25 154 1.66 240 2.59 458 4.94 360 3.88 1212 13.06

26-35 286 3.08 268 2.89 633 6.82 55 0.59 1242 13.39

36-45 881 9.49 260 2.80 1322 14.25 65 0.70 2528 27.24

46-55 967 10.42 164 1.77 1202 12.95 92 0.99 2425 26.13

55-65 908 9.79 67 0.72 725 7.81 172 1.85 1872 20.17

total 3196 34.44 999 10.77 4340 46.77 744 8.02 9279 100.00

Page 8: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Impact of demographic change

Consequences of demographic change:

Labor cost is rising quickly, due to out migration and aging, as

well as fast growth in economy and farmers’ income.

Labor/land ratio is still high, implying labor supply is not short

in absolute terms; however, rural labor force may soon

shrink rapidly in coming decades due to age structure.

Alternatives facing rising labor cost: Substitution of inputs or shift of production.

Page 9: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Farmers adaptation

Substitution of machinery for labor:Technical possibility: plain area;Economic viability: economy of scale in machinery operation;Institutional innovation: market of machinery service.

Shift of production:

Technical possibility: favorable condition for high-value products;

Economic viability: output value high enough to compensate rising labor costs;

Institutional innovation: marketing chain of high value products.

Page 10: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Farmers adaptation

An important constraint: seasonality of labor demandIf one or some field work requires intensive labor input in a short

and inflexible time period, farmers may not be able to employ non-family members to do it, even in production of high-value products;

Such a production might be restricted and/or relocated to regions where family labor is able to it alone, and/or labor could be sufficiently employed in other production at other times.

The basic requirement to reduce labor cost is to smooth labor demand over time in a year, providing adequate employment opportunity in an evenly distributed manner in a region.

Page 11: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Evidences from coastal provinces

Substitution of machine for labor: Grain production did not decline in Jiangsu where machinery

service has well advanced in big plain areas, while reduced by 45%, 27%, and 25% in Zhejiang, Fujian and Guangdong machinery service is restricted by natural conditions.

Page 12: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Evidences from coastal provinces

Shift of production: Vegetable sown areas have been more than doubled in

Jiangsu and Zhejiang, while increased by 50% in Fujian and Guangdong. Though labor-days required in vegetable production is about 5 times higher, net profit per unit of labor cost is 50% higher also.

Page 13: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Evidences from coastal provinces

Seasonal imbalance of labor demand and supply: Jiangsu has been a major silkworm production area for centuries.

Though net profit in silkworm production is less that in vegetable production, it is more than twice that in grain production. However, even if grain sown area did not decline significantly, silkworm production has reduced by almost 65% since 1995.

Labor inputs per mu are 6.8, 48.6 and 32.8 days for days for grain, silkworm, and vegetable production, respectively; but hired laborers are 1 and 10.4 days in silkworm and vegetable production. It is not likely that laborers are not available for hiring in general, as vegetable farms are hiring large number of laborers in the same location. It is quite possible that the labor input in silkworm production is too concentrated in short time, no labor supply able to meet such a demand.

Silkworm production has been shifted to Guangxi, where farmers may work all year round, though income much lower per season compared with their counterpart in Jiangsu.

Page 14: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Future Trends

Labor force:

Continues aging, and shrinking soon.

Production:Low-value bulk commodities may relatively concentrate in big

plain areas;

High-value horticulture production may relatively move to hilling areas;

Production with extreme seasonal labor demand may gradually reduce; or move to locations where labor could be employed more evenly in a year due to counter-season conditions.

Page 15: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Technology innovation needed

Bulk commodities: Reduce labor demand in remaining bottleneck period, such as

spraying.

Biological technique, and /or appropriate field practice, allowing extended time for spraying without reduction in efficiency;

Increasing efficiency in spraying, such as utilization of unmanned aerial vehicle.

High-value horticulture products: Reduce seasonal imbalance in labor demand, and promoting

mechanization in hilling areas.

Biological technique, and /or appropriate field practice, allowing more evenly use of labor in a year;

Design and produce new equipment targeting hilling areas.

Page 16: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Conclusion

Due to demographic change and international competition, future innovation should focus more on cost saving, especially labor saving, instead on yield enhancing ignoring rising cost.

Special attention should be paid to seasonal nature of labor demand, targeting technologies which directly easing labor demand during bottleneck seasons.

Specific strategy in various regions and dealing with different production lines should be coordinated based on natural, technical, economic, and institutional conditions.

Page 17: Impact of demographic change on agricultural mechanization: farmers’ adaptation and implication for public policy

Thanks!