How Much Farmland Are Farmers Willing to Lease? The Construction and Evaluation of a Farmland Transfer Supply Function with Application to a Case Study in China

Abstract

China is going to vigorously develop a new type of agricultural business that is characterized by large-scale planting, and its farmland transfer market is expected to shift from a “buyer’s market” to a “seller’s market”. In the literature, the optimal scale of farmland management is mainly discussed from the perspective of farmland lessees. The development of a healthy farmland transfer market should also consider the needs of farmland lessors. In this paper, we construct a farmland transfer supply function from the perspective of farmers, based on the theory of land market pricing, and apply it to assess the price–volume relationship using surveyed farmland transfer data on wheat farmers in Henan Province, China. The major findings of the present study are as follows: (i) farmers can optimize the allocation of production factors through the farmland transfer market to maximize their profits, and (ii) the quantity of farmland transferred to the market is significantly positively correlated with the price of farmland transferred, demonstrating a power function relation. Currently, the average price of farmland transferred in China’s main grain-producing areas exceeds CNY 800 per mu. There is a difference between the actual quantity of farmland transferred and the supply function estimated in this paper, indicating that the market is currently in a crucial period of vigorously promoting farmland transfer. We suggest that government departments follow the laws of farmland transfer, refer to the farmland transfer supply function, and implement policies that support and benefit grain production to provide rapid and consistent guidance to the farmland transfer market.