Impact of farmland quality on farmland rents and its constraints: Evidence from plots in six Chinese provinces

Abstract

Farmland rents are related to farmland transfer efficiency and a key factor affecting the development of large-scale agricultural operations and food security. However, rents in some regions with poor-quality farmland are higher than those in high-quality regions, especially in China, which could distort farmland market development. To clarify the key factors driving this relationship between poor quality and high rents for farmlands, this study constructs a theoretical framework of the impact of farmland quality on rent and its limiting factors. An empirical analysis is performed based on 5176 farmland-inflow plots surveyed in six Chinese provinces from the “Farmland Assets Inventory Database” of the Ministry of Natural Resources in 2020. The effect of farmland quality on rents and its constraints are investigated using a moderating effect model by introducing three interaction variables: of market proximity, type of crop planted, and economic environment. The results reveal that, although overall farmland quality still contributes positively to rents, some farmlands in China have developed poor-quality, high-rent patterns. Specifically, the positive effect of farmland quality on rents decreases for three key reasons: (1) increased transportation costs as the distance between plots and agricultural sales markets increases; (2) increased production returns when non-grain crops are planted; and (3) increased production costs as the economic development level of the region where plot is located increases. These effects vary across topographic regions. In plains areas, farmland quality’s impact on rents is limited by market distance and type of crop planted, whereas in mountainous areas, this is mainly limited by type of crop planted. Ultimately, government should regulate the deviation of farmland rents in China by perfecting farmland use control and establishing a monitoring mechanism for rents.