Abstract:This paper analyzes the relationship between transaction cost and specialized agricultural services’ mode by making a case study on Shungeng Cooperative,an institution welldeveloped in Shandong Supply and Marketing Cooperatives’ reform. The results show that:(1)The economic rationality of specialized agricultural services’ mode of Shandong Supply and Marketing Cooperatives lies in lowering transaction cost of service outsourcing of agribusiness,and improving operating revenue of land; (2) More integrated vertical coordination between specialized agricultural services’ supplier and demander can decrease transaction cost of service outsourcing,thus eventually improving land productivity on the basis of better service quality and lower service cost. To enhance the vertical coordination between specialized agricultural services’ supplier and demander,government is suggested to fortify the construction of projects for cultivating new types of agribusiness and new types of skilled farmer; rural organizations are supposed to tap their potentials of supplying specialized agricultural services by appropriate institutional arrangements; agricultural enterprises,colleges and universities,and scientific research institutions are responsible for deepening scientific research to supply qualified,efficient and costsaving agricultural materials and social services,like machinery service.