Interpretation: How can we gauge pesticide demand by examining grain, land, and farmers?

Supply arises only from demand. Demand drives the research and development of new products, the production of goods, and market supply. The principle that demand determines supply is an iron law of economics. To explore the development trends of the agrochemical industry, we must first begin by examining the demand side. Farmers are the primary purchasers of agrochemicals, and agriculture is the sector they serve. Therefore, studying agrochemicals requires starting with an analysis of agriculture and farmers. As the saying goes, “Grasp the main thread, and everything else will fall into place.” At present, China’s agriculture, rural areas, and farmers are undergoing a transformation of unprecedented magnitude in a millennium. With myriad and complex factors at play, identifying the “main thread” means focusing on the key elements that shape agrochemical demand. For Chinese agriculture, food security, the scale of land management, and the question of who will farm are the critical determinants; accordingly, any analysis of agrochemical demand must begin with these issues—food, land, and people.
　　　　　　
1. One of the key factors influencing pesticide demand: food security

As a major country, China must keep food security firmly in its own hands. General Secretary Xi Jinping has repeatedly emphasized: “The Chinese people’s rice bowls must always be held securely in their own hands, and our rice bowls should primarily contain Chinese grain.” Regarding the “primarily containing Chinese grain” mentioned by the General Secretary, relevant authorities have provided further clarification: “ensure basic self-sufficiency in grains and absolute food security for staple foods,” while also implementing the strategies of “storing grain in the land” and “storing grain in technology.”

However, ensuring food security faces several practical contradictions. First, there is a tension between domestic and international grain prices: domestic small-scale farming costs remain high, making it difficult to compete with the low‑cost grain produced by large‑scale operations, particularly in the United States. Meanwhile, further increasing subsidies for domestic grain production would not only strain the national budget but also invite criticism from other countries. Second, there is a conflict between grain cultivation and farmers’ income growth: low profit margins in grain farming mean that smallholders earn little, prompting many to shift toward cash crops such as fruits and vegetables and diversify their livelihoods. Third, grain production clashes with people’s aspirations for a better quality of life. As incomes rise, consumers’ expectations for food have evolved—they no longer seek merely to be fed, but to eat well and enjoy a richer, more varied diet. This “eating well” entails consuming not only staple grains, but also a diverse array of green, nutritious products, including fruits, vegetables, and whole grains.

How should we address these three pairs of contradictions? The time‑tested approach remains: apply dialectics to strike a balance and maintain the proper measure—embracing both this and that, while avoiding any one‑sided neglect. In 2017, Document No. 1 issued by the CPC Central Committee explicitly called for advancing supply‑side structural reform in agriculture. This reform must, on the basis of ensuring national food security, closely align with shifts in market demand, with the primary goals of increasing farmers’ incomes and guaranteeing effective supply; prioritize improving the quality of agricultural output; and rely fundamentally on institutional reforms and innovative mechanisms. It seeks to optimize the agricultural industry, production, and management systems, raise land productivity, resource utilization, and labor productivity, and steer agricultural and rural development away from overreliance on resource consumption and an emphasis on quantity, toward green, ecological, and sustainable growth that places greater weight on meeting qualitative demands. The policy rests on three core principles: first, safeguarding national food security—this is the bedrock and must remain inviolable; second, pursuing green, ecological, and sustainable development; and third, shifting from satisfying consumers’ quantitative needs to fulfilling their expectations for higher‑quality agricultural products.

Under the policy framework of ensuring food security, what impacts will advancing supply-side structural reform in agriculture have on both the agricultural sector and the pesticide industry?

First, the state will inevitably do everything possible to ensure the sown area of grain and, within feasible limits, keep grain prices stable or raise them slightly; however, the situation in which the comparative profitability of growing grain remains low will still be difficult to change.

Second, produce high-quality agricultural products and strive for premium quality at premium prices.

Third, we will promote the development of specialty agriculture, agri‑tourism‑integrated agriculture, and branded agriculture.

2. Another key factor influencing pesticide demand: land tenure and farm size

The overall trend in the use of agricultural land is a gradual increase in concentration: by the end of 2018, the area under land transfer accounted for nearly 40% of contracted farmland, with transfers primarily directed toward new types of agricultural operators such as cooperatives, family farms, and agribusinesses. However, the pace of land transfer has slowed compared to previous years, while small-scale farming households remain numerous and are likely to persist over the long term. What implications will this have for the demand for pesticides?

New types of agricultural operators acquire land from smallholder farmers by paying a certain land‑transfer fee and labor wages. Compared with the smallholders’ own contracted plots and self‑employed labor, their costs are already higher. To sustain operations and expand reproduction, they must achieve higher yields. Under the constraint of price ceilings for major grain crops, they can pursue only three strategies: first, cultivate cash crops—especially niche market crops—leveraging the relatively higher management complexity and favorable market returns of these specialty crops to generate profits; second, build brands by strengthening input‑quality control and marketing efforts, thereby establishing a reputation for green and organic products and capturing premium margins; and third, rigorously manage input costs through measures such as improving input utilization, deploying large‑scale agricultural machinery to reduce per‑unit‑area operating expenses, and adopting new technologies to cut labor requirements. Collectively, these strategies have the following implications for pesticide use: increased demand for pesticides on niche crops; greater demand for low‑residue, environmentally friendly products like biopesticides; and growing demand for formulations suited to large‑scale equipment, such as drones.

3. The third key factor influencing pesticide demand: Who is farming?

Since the launch of reform and opening-up, particularly since the turn of the new century, the composition of the agricultural workforce has undergone profound changes.

First, new types of agricultural business entities have been steadily expanding, with significant growth observed among agricultural companies, cooperatives, family farms, large-scale farmers, and various agricultural production cooperative organizations. According to 2018 data, there were 485,000 family farms registered in the national directory maintained by the agriculture and rural affairs authorities, 2.076 million farmer professional cooperatives duly registered under the law, nearly 130,000 leading enterprises in agricultural industrialization, and over 1.15 million agricultural social service organizations.

Second, relatively speaking, the number of smallholder households and the area under their management in traditional agriculture have already declined substantially. However, owing to China’s large population and limited arable land, the capacity of urban industries and commerce to absorb rural labor, and the fact that farmers’ contracted land continues to serve as a partial social safety net, the Party and the government, on the one hand, actively support new types of agricultural business entities in pursuing large-scale operations; on the other hand, they do not advocate the rapid elimination of small-scale farming households. Instead, they adopt a variety of measures to help smallholders integrate with modern agriculture (February 2019, “Opinions on Promoting the Organic Integration of Smallholder Farmers and Modern Agricultural Development”), thereby enabling them to participate in the development of modern agriculture.

Third, rural areas face a structural labor shortage, leading to rising labor costs. The rural elite and the majority of young and middle-aged workers have already migrated to urban employment, making rural hollowing-out and escalating agricultural labor costs undeniable realities. It is precisely this structural labor scarcity that has given rise to rural social service industries, particularly agri‑production‑related services.

The evolving landscape of new agricultural business entities and agricultural workers is inevitably exerting a profound impact on the pesticide industry:

First, the primary purchasers of pesticides have quietly shifted from smallholder farmers to new agricultural business entities that now form the backbone of the sector. With this change in buyer demographics, these newer entities—compared with smallholders—possess a deeper understanding of pesticides, are more receptive to innovative products, and place higher demands on their intrinsic quality.

Second, smallholder farmers operate on a very limited scale; the primary labor force in these households migrates to urban areas for work, leaving elderly individuals or women to manage farming. These farmers generally have low levels of education, limited technical expertise, and weak managerial capabilities, resulting in agricultural income accounting for only a small share of their total household earnings—so much so that agriculture has effectively become a secondary occupation. Consequently, they lack the skills to properly identify, select, and apply pesticides, exhibiting a strong tendency toward conformity: they readily follow others’ recommendations and engage in blind imitation. However, if professional service providers offer reasonably priced services, these farmers are quite willing to entrust them with specific tasks or even comprehensive management, or to establish stable partnerships with cooperatives, enterprises, and other entities.

Third, rural labor now has more options: whether it’s migrating to cities for work, providing socialized services in rural areas, or running family‑run businesses, farmers take “opportunity costs” into account. When urban wage employment offers higher incomes, young and middle‑aged workers opt to leave home, while the elderly and children remain on the farm—this reflects a rational division of labor within the household. Similarly, for certain agricultural tasks that are too demanding for older adults or children, or where doing them themselves is not economically viable, farmers are increasingly willing to entrust these activities to specialized service providers. Minimizing labor costs associated with pesticide application has thus become a key focus of innovation in agrochemical products—explaining why herbicide sales have risen and bundled pesticide packages have gained popularity in recent years. Moreover, the ultimate purchaser of pesticides may no longer be the farmer directly; instead, it is often a socialized service organization, which has significantly enhanced its understanding of crop protection products and its bargaining power over pricing.

4. Industry Responses

As demand evolves, the agrochemical industry must adapt. There is no silver-bullet solution in the pesticide market; the only true strategy is to respond to change with flexibility.

4.1. Focus on R&D to develop products that meet emerging needs.

At all times, a great product is the foundation. A great product does not necessarily have to be a novel formulation; rather, it is one that saves labor, lends itself to large-scale production and mechanization, suits specific crops, aligns with evolving consumer preferences, addresses emerging agricultural trends, and meets new environmental requirements. Such products stem from meticulous observation and analysis of industry needs, as well as from sustained R&D tailored to those emerging demands. For small enterprises, application‑oriented R&D that responds to new needs is especially critical.

4.2 Quasi-Positioning

There is no such thing as a pesticide that can cure all ailments; only large enterprises can maintain a fully integrated, end-to-end agrochemical production line. For small businesses, diversification often leads to a dead end—spreading resources too thin, driving up costs, and squeezing profit margins. Only by pinpointing a clear market niche, focusing on a single area, deepening expertise, and highlighting unique strengths can they create lasting value and carve out a meaningful share of the market. Some small business owners specialize in a single crop—or even a single pest or disease—turning a localized, narrow market into a substantial, aggregate opportunity. Though their product range may be limited, their profits can still be quite substantial.

4.3 Re-promotion

Even the finest wine fears being hidden in a secluded alley; in an era of robust market competition, it’s rare for a “princess” to find a suitor without effort. A truly excellent product can only capture the market with strong, effective promotion. Coupled with farmers’ preference for tangible, on‑the‑ground evidence, the regionally specific nature of pest, disease, and weed pressures, and the complexity of selecting and applying pesticides, agrochemical companies must stay closely connected to the realities of the field—establishing demonstration plots and using clear, comparative trials to win over and retain farmers. When the results are unmistakable, farmers will naturally embrace such products without hesitation.

4.4 Requesting a Turn

Social progress invariably advances along the path of specialization, and agriculture is likewise shifting from a model in which farmers handle everything themselves to one characterized by outsourced services. The shortage of young, educated farmers has made outsourcing certain agricultural tasks an inevitable trend, yet China still lags far behind developed countries in the development of agricultural socialized services. In response to the needs of modern agricultural development, the national government is actively supporting the expansion of such services. Compared with the fiercely competitive “red ocean” of the pesticide market, the field of agricultural socialized services remains in its early “blue‑ocean” phase. Some small pesticide firms enjoy a natural affinity with agriculture—deeply understanding and familiar with the sector—and thus possess significant advantages in providing socialized agricultural services. By aligning with this trend and acting strategically, “transitioning” can indeed be a wise choice.

4.5 Able to persevere

The era of “making quick money” is over; only sustained, long-term effort will yield lasting results. Particularly in agriculture—an industry where economic reproduction and natural regeneration are intertwined—the sector’s biological characteristics dictate long production cycles, slow capital turnover, and pronounced regional variations. Consequently, it is even harder for the pesticide industry to “make quick money,” making steadfast commitment and deep cultivation all the more crucial. As the saying goes, “To test jade, one must fire it for three full days; to discern talent, one must wait seven years.” Choice is silver, perseverance is gold; success is the fruit of unwavering dedication—rarely does one strike gold right from the start.

Source: Pesticide Science and Management   Author: Wu Guoqiang, Secretary of the Pesticide Inspection Institute, Ministry of Agriculture and Rural Affairs