The story of internet agriculture begins, and the exciting content is not to be missed

From Shennong's invention of slash-and-burn farming and teaching the people to reclaim wasteland and plant food crops, several thousand years have passed, yet the pattern of China's smallholder economy has basically remained unchanged. When agriculture encounters the internet, a chemical reaction occurs. Convenience, real-time operation, perceptiveness, IoT connectivity, intelligence... everything is innovating agriculture's inherent industrial model and driving China's agriculture to accelerate toward modernization.

China's agricultural modernization cannot be achieved overnight. How can the internet change this most backward industry? The answer is that it must start from the end link that is easiest to transform. The exploration has begun. The internet agriculture service industry, represented by agricultural-input e-commerce and rural internet finance, is rising, and "internet + agriculture" has already taken its first step.

Agricultural-input e-commerce players compete for a trillion-yuan "cake"

With the accelerated advancement of land transfer, China's agricultural production and operation entities are also changing. Large growers, family farms and rural cooperatives are rising rapidly, and the traditional "production - distributor - grower" business model of agricultural-input enterprises is undergoing transformation. Agricultural inputs will enter a stage of direct supply to large growers. Agricultural-input e-commerce platforms can precisely provide direct-sales channels.

How big is the agricultural-input market, and how much potential can agricultural-input e-commerce tap?

Luo Wensheng, vice president of Kingenta, did a calculation for the Shanghai Securities News reporter: at present, the national cultivated-land planting cost is about 120 billion yuan, fertilizer cost 630 billion yuan, pesticides 120 billion yuan, foliar fertilizer cost 30 billion yuan, seed dressing agents 60 billion yuan, adding up to 960 billion yuan. "What a huge market this is! The prospects for the agricultural-input e-commerce market are very broad."

This is still a relatively conservative estimate. According to calculations from institutions such as Ping An Securities and Qilu Securities, the market size of just three types of agricultural inputs - chemical fertilizers, seeds and feed - exceeds one trillion yuan.

It is precisely because they have seen the huge potential that leading enterprises in the agricultural-input field have rushed to "get online." Since the beginning of this year, investment intensity has shown a trend of acceleration and increase.

Leading fertilizer producers such as Kingenta, Batian Shares and Sierte have all entered the e-commerce field. "Nongshang No. 1," built this year with a total investment of 2 billion yuan by Kingenta's controlling shareholder, is about to go online. This is currently the agricultural-input e-commerce platform with the largest investment.

After acquiring Jinhe Tiancheng, a company focused on agricultural informatization, last year, Batian Shares has actively laid out operations in the Internet of Things, big data, mobile internet and agricultural-input trading platforms. Sierte also established an e-commerce company early this year to build an "O2O" agricultural-input e-commerce service platform.

Pesticide leaders Noposion and Huifeng Shares have also accelerated their e-commerce layout since last year. Since Huifeng Shares' Nongyi Network went online in November last year, its e-commerce business has developed far beyond expectations. At the end of March this year, Noposion conducted public testing of Nongji Network, an agricultural-input e-commerce platform in which it holds 100% equity.

During its research, the Shanghai Securities News reporter also found that agricultural-input enterprises do not position e-commerce as a purely "sales platform," but as a "service platform" integrating agricultural-input supply, information-based management services and financial support. Many enterprises are accelerating their transformation from agricultural-input producers and sellers into service providers.

On May 11, Noposion announced that it would increase the capital of Shenzhen Tiantianquan Agricultural Service Co., Ltd. by 330 million yuan with its own funds to lay out operations in the internet agriculture service field. As early as February, Stanley had invested 500 million yuan to establish an agricultural service company, mainly providing agricultural planting services and agricultural financial services.

"Fertilizer is a hundred-billion-level market, and reaching ten billion in it is already a lot. But agricultural services are a trillion-level scale, and we can reach the hundred-billion level," Stanley president Gao Jinhua told the Shanghai Securities News reporter, expressing confidence in its transformation into an agricultural-input service provider.

At a pig farm on the outskirts of Langfang, senior executives of Ouhua Agriculture and Animal Husbandry Company demonstrated to the Shanghai Securities News reporter how to use Pig Network to monitor pig inventory, feed usage and epidemic warnings.

Just this Tuesday, Dabeinong Group officially launched Pig Network version 2.0 and released the mobile APP Zhinongtong. Dabeinong executive vice president Xue Suwen told the Shanghai Securities News reporter, "Pig Network is an entry point. We want to build a smart Dabeinong ecosystem through Pig Network, Pig Trading (Nongxin Mall) and Pig Finance (Nongxin Finance)."

During its research, the Shanghai Securities News reporter also found this phenomenon: agricultural-input enterprises generally believe that the internet is only a carrier, and the core competitive elements of agricultural-input e-commerce still come from offline. "Unlike other industrial products, the sale of agricultural-input products cannot rely purely on online channels. Farmers are afraid of buying fake seeds or fake pesticides. They rely relatively heavily on acquaintance-based economy, so the role of distribution outlets is irreplaceable," Gao Jinhua said.

Cui Bin, board secretary and deputy general manager of Kingenta, also told the Shanghai Securities News reporter, "The company is about to launch an agricultural-input platform. We only treat it as a service tool, but the real core competitiveness still lies in distribution channels." The company has a team of 100,000 secondary distributors.

"Pain points" become "highlights"

During visits to enterprises, the Shanghai Securities News reporter learned that among the many agricultural service fields, the one enterprises are most interested in and the most indispensable link in agricultural enterprises' internet layout is financial services.

"After land transfer, we found that there is a more urgent need than agricultural-input services, namely a funding gap. At present, it is very difficult for growers to obtain loans, because the credit reporting process in rural areas is very difficult, and banks rarely lend. This is agriculture's pain point," Stanley vice president Zhang Lei told the Shanghai Securities News reporter.

Since last year, Stanley has tried cooperating with distributors. In addition to selling fertilizer, it also provides users with small loans. "The hardest part of rural finance is credit reporting. We have distributor teams rooted in local areas who are familiar with their own users and can leverage advantages in the credit reporting process. Distributors are also using this to transform," Zhang Lei said.

When the wave of "internet + agriculture" arrives, some enterprises still understand it as building websites and developing APPs, "but these actually have limited effect on raising a company's valuation unless an outlet for monetization is found. Now the outlet for monetization has been found, and it is internet finance," said Gong Yanhai, an agriculture analyst at Shenwan Hongyuan Securities.

"Whoever is the leader of rural finance is the leader of the industrial chain. Whoever fully utilizes the leverage of rural finance will remain invincible in industrial competition," pointed out Xue Suwen, who has a finance and accounting background, noting that finance may become the commanding height of industrial services.

Based on this understanding, Dabeinong innovated its profit model and launched a series of internet financial products, such as Nongfubao, which has wealth-management and payment functions, the payment platform Nongfutong, and rural credit offerings such as Nongyindai, Nongnongdai and support funds.

Xue Suwen disclosed to the Shanghai Securities News reporter, "Dabeinong has already established a microcredit company, and this year will focus on its own 'Nongyindai.' In addition, in the second half of the year it will also launch 'Nongnongdai,' which is a P2P model. We think this is the segment with the most potential and the best prospects."

In addition to Stanley and Dabeinong, the Shanghai Securities News reporter found after sorting through information that A-share agricultural listed companies such as Huifeng Shares, Kingenta, Batian Shares, New Hope, Kondarl and Jianghuai Power are all already engaged in or planning to enter internet financial business.

New Hope Finance may be among the earliest to enter and the most active. As early as 2007, to solve the financing difficulties of farmers, New Hope established China's first breeding guarantee company in Shandong Province, providing guarantees for farmers who purchase the company's feed products.

In 2013, New Hope launched the technical service "Fuda Plan" to find potential customers and then connect with its own farmers' funding needs. New Hope Finance is also similar to the P2P model. In March this year, the "Hope Finance" platform went online. According to a Qilu Securities research report forecast, "Hope Finance" is expected to reach a transaction volume of 500 million yuan to 1 billion yuan this year.

Internet finance is a blue ocean. Chen Xingyao, chairman of New Hope Huinong (Technology) Information Co., Ltd., believes that the rural financial market space is estimated at 2 trillion yuan.

Yang Zhangbing, deputy general manager of Shanghai Nongyi Information Technology Co., Ltd., said, "2 trillion yuan is probably an underestimate." He gave his own company as an example to the Shanghai Securities News reporter: "At present, the company is carrying out rural microcredit services with local financial guarantee companies. In just 7 or 8 months, the loan volume in one county exceeded 1.1 billion yuan. There are more than 2,000 counties nationwide. You can imagine how large this market demand is!"

"Policy red envelopes" are being distributed frequently

In addition to enterprises' own efforts, rural e-commerce will also enjoy policy "sunshine."

The Shanghai Securities News reporter learned exclusively that the first draft of the Guiding Opinions on Accelerating the Development of Rural E-Commerce, led by the Ministry of Commerce and involving more than 20 ministries and commissions including the National Development and Reform Commission, the Ministry of Finance and the Ministry of Agriculture, has been completed and is currently in the stage of inter-ministerial joint signing. The final document will be issued in the form of a State Council General Office document.

This is the first document to comprehensively deploy rural e-commerce development work, focusing on four aspects: the information-based transformation of traditional rural circulation networks, the development of agricultural product e-commerce, support for agricultural-input and agricultural-machinery production and circulation enterprises to develop e-commerce, and the expansion of rural e-commerce service fields.

It is worth noting that agricultural-input services will be the focus of future rural e-commerce policy. Kong Lingyu, deputy director of the Market System Construction Department of the Ministry of Commerce, stressed in an interview with the Shanghai Securities News reporter, "In the next step of developing rural e-commerce, we must support agricultural-input and agricultural-machinery production and circulation enterprises in developing e-commerce, and develop the agricultural-input stores of the Ten Thousand Villages and Thousand Townships project into agricultural-input e-commerce service stores at farmers' side. Combine agricultural-input sales with guidance for production."

Since the beginning of this year, rural e-commerce has received wave after wave of policy "red envelopes." From March to now, in just two months, the State Council and relevant ministries and commissions have successively issued three heavyweight documents.

On March 12, four departments - the Ministry of Transport, the Ministry of Agriculture, the All China Federation of Supply and Marketing Cooperatives and the State Post Bureau - jointly issued Several Opinions on Coordinating the Promotion of the Healthy Development of Rural Logistics and Accelerating Service to Agricultural Modernization. The opinions proposed supporting postal and express delivery enterprises in extending their business to rural areas and opening up a two-way fast channel for rural logistics to "go to the countryside and enter the city." At the same time, support e-commerce, logistics, commerce, finance and other enterprises in participating in the construction of agriculture-related e-commerce platforms, and guide rural logistics operating entities to rely on third-party e-commerce service platforms to carry out business.

On May 7, the State Council issued the Opinions on Vigorously Developing E-Commerce and Accelerating the Cultivation of New Economic Momentum, emphasizing the active development of rural e-commerce and encouraging agricultural means of production enterprises to develop e-commerce.

On May 15, the Ministry of Commerce issued the "Internet + Circulation" Action Plan. In this special action plan by a ministry to implement the "Internet +" proposed in the government work report, promoting e-commerce into rural areas is a major focus.

At the National Rural E-Commerce On-Site Meeting held the previous day, Wu Xiangyun, director of the Commerce Division of the Economic Construction Department of the Ministry of Finance, also disclosed that this year the central government will allocate 2 billion yuan in special funds for rural e-commerce infrastructure construction.

In addition, the Shanghai Securities News reporter also learned from the Ministry of Agriculture that developing agricultural e-commerce has been listed as one of the Ministry of Agriculture's 20 key tasks this year, emphasizing the need to make full use of the information-into-villages-and-households platform and carry out pilot projects for direct product delivery to urban communities and agricultural means of production going to the countryside.

Under government-enterprise coordination, "internet + agriculture" is starting from rural e-commerce and rural finance, advancing step by step in depth. The story of China's internet agriculture has begun.