Agricultural modernization must advance the integrated development of the primary, secondary and tertiary industries

In 2015, the No. 1 Central Document, "Several Opinions of the Central Committee of the Communist Party of China and the State Council on Increasing the Intensity of Reform and Innovation and Accelerating the Construction of Agricultural Modernization," was officially released. Agricultural modernization became the primary topic, and greater emphasis was placed on policy design at the micro level. The Chinese economy is seeking dividends from agricultural reform, and modern agriculture is becoming a new round of national-level strategic opportunity. The time to strive to be a farmer has arrived!

The main contents of the "No. 1 Document" include: centering on building modern agriculture and accelerating the transformation of the agricultural development model; centering on promoting increases in farmers' incomes and increasing the intensity of beneficial agricultural policies; centering on integrated urban-rural development and deeply advancing the construction of a new countryside; centering on adding vitality to rural development and comprehensively deepening rural reform; and centering on doing a good job in work related to "agriculture, rural areas and farmers" and strengthening the building of the rule of law in rural areas. Although agricultural modernization has been proposed for many years, this year it became the primary topic of the No. 1 Document for the first time, and greater emphasis was placed on policy design at the micro level. Under this topic, it specifically includes promoting the integration of the primary, secondary and tertiary industries in agriculture, developing modern agricultural circulation methods, and agricultural product e-commerce.

Under the new normal of the economy, the Chinese economy must seek new growth points, and reform is an important way for the Chinese government to release productive forces. At present, the parts that have been opened to marketization are already fully competitive, and there is an urgent need for the state to break some policy-monopolized industries and release the growth power that can drive the development of the entire country. Agriculture is precisely an important choice of this government. In this No. 1 Document, further implementing the land transfer policy is precisely a policy-based liberation of agriculture. As an industry affected by policy, agriculture has taken a key step toward marketization, and agriculture is truly ushering in an era of market competition.

The new "connect secondary and tertiary" industrial model: the era of Agriculture 3.0

The No. 1 Document focused on promoting the integration of the primary, secondary and tertiary industries in agriculture. Last month, Vice Premier Wang Yang of the State Council also said during an inspection of modern agricultural construction work in Beijing that it is necessary to transform the agricultural development model, accelerate the construction of an "connect secondary and tertiary" full agricultural industry chain, promote the integrated development of agriculture with the secondary and tertiary industries, and raise the level of agricultural modernization. "Connect secondary and tertiary" refers to the essential characteristics of modern agriculture and brand agriculture, and is an inevitable trend of economic development.

The practice and economic laws of modern agriculture tell us that those engaged in agriculture not only engage in planting and breeding (primary industry), but also must engage in agricultural product processing (secondary industry), and also must engage in the sales of agricultural products and their processed products and related services (tertiary industry), turning agriculture, which was originally the primary industry, into a comprehensive industry, increasing the value of agricultural products, and increasing the income of farmers and agricultural industrialization enterprises. Some scholars call this kind of modern agriculture that connects the primary, secondary and tertiary industries the "sixth industry."

Haoxiangni Jujube, Wujiang Pickled Mustard Tuber, Laoganma, and Zhongjing Mushroom Sauce are all outstanding representatives of the sixth industry.

The growth power of traditional agricultural enterprises such as base-type, raw material-type, rough processing, and foreign trade OEM export-oriented enterprises has already been fully released in the era of Agriculture 2.0. Now, strategies must be adjusted and they must enter the era of Agriculture 3.0 with the new "connect secondary and tertiary" industrial model. Otherwise, they will lose competitiveness and may even be eliminated by the market.

To build a new "connect secondary and tertiary" agricultural industry, the "three disciplines" must be observed:

Discipline one: It is strictly forbidden to take all of the full industry chain

The new "connect secondary and tertiary" industrial model of modern agriculture emphasizes connection and control, and does not mean that the enterprise itself absolutely owns everything. The agricultural industry chain is extremely long. If the entire chain is operated by oneself, there are many links, high difficulty, and great risk. Even a central state-owned enterprise with strong strength like COFCO faces many challenges, let alone small and medium-sized enterprises.

To connect the links of the primary, secondary and tertiary industries, it is necessary to follow the principle of "professional division of labor and vertical and horizontal integration," clearly recognize the industrial competitive landscape and factors, clearly recognize one's own genes, advantages and disadvantages, focus strategically, exert effort at the key points of the industry chain, and use the local to control the whole.

Discipline two: It is strictly forbidden to emphasize factory equipment while neglecting the market and brand

High-end industrial parks, factories and equipment are important, but they are not decisive. Never only value visible factory equipment and hardware investment while despising the invisible market expansion and brand building. The market is more important than the factory! Otherwise, even while holding a golden rice bowl, one still will not have food to eat.

Without a winning position, all advantages lose meaning; without brand and market, all resources and ideals are empty and dull. From farm to market, from mayor to market, from product to brand, the strategic focus of China's agriculture must shift from industrial investment (speculation) to brand building.

Discipline three: It is strictly forbidden to cross the river by feeling the stones

Modern agriculture and brand agriculture are new undertakings and new challenges. Enterprises should avoid the idea of being omnipotent and going on the road by feeling the stones themselves. Often, when they reach the end of the road, they find that the direction was wrong, which not only consumes money and damages confidence, but more importantly delays market opportunities.

There are no shortcuts in agriculture. The biggest shortcut is to take fewer detours (preferably none at all). One must plan before acting, first use external brains to do a good job in top-level design, plan the direction and path well, and then proceed step by step. As long as the direction is right, there is no fear that the road is long.

Protect income and promote consumption: agriculture in the modern countryside

The No. 1 Document focused on the construction of the modern countryside. Without a modern countryside, there is no modern agriculture. The No. 1 Document made clear requirements, including giving priority to ensuring investment in agriculture and rural areas, improving the effectiveness of agricultural subsidy policies, and improving the price formation mechanism for agricultural products. The construction of a new agricultural management system, reform of the rural collective property rights system, and reform of the land system were also covered at length in the No. 1 Document. The reform and development of supply and marketing cooperatives and agricultural reclamation were written into the No. 1 Document for the first time in recent years.

It is necessary to handle the issue of the rural population well and increase farmers' incomes. On the one hand, for farmers who remain in rural areas, it is necessary to continue increasing farmers' incomes, encourage farmers to grow grain, protect farmers' contracting rights and transfer rights to land, ensure equalization of public services for the rural population, and strengthen rural infrastructure construction; on the other hand, for farmers who leave the land and go to cities to work, it is necessary to provide vocational education opportunities, create conditions for equal sharing of public services, and help farmers achieve citizenization.

Channel sinking has become a powerful path for sales growth. With the construction of the modern new countryside and the development of multiple types of agricultural operating entities, rural areas will release more employment opportunities and consumption opportunities. Farmers who leave the land, through land transfer and reemployment, achieve income growth. At the same time, because they leave the land, the self-sufficient small peasant economic model is broken, and this income growth will be transformed into real consumption power. Therefore, it can be foreseen that channel sinking will become a powerful path for the sales growth of fast-moving consumer goods, and a group of new fast-moving consumer goods brands will, in this wave, achieve the creation of third- and fourth-tier brands.

Rural infrastructure construction becomes new growth. China has already passed the period of real estate-driven growth and entered a period of agriculture-driven growth. But new rural infrastructure will still be an opportunity for building materials such as cement and steel bars and for real estate developers. Moreover, as a key project in building the new countryside, it will be more likely to obtain government support.

Focus on the development of agricultural product e-commerce: agriculture under modern business methods

Looking at this government, in 2014, from the introduction of the first rural financial policy to the release of the first China Agricultural Brand Report, and then to Li Keqiang's inspection of Taobao villages, it can be seen that this government is more inclined to use new market methods and approaches. In this No. 1 Document, it was proposed to attach importance to the use of agricultural product e-commerce. It can be foreseen that in 2015, the government will issue more favorable policies for agricultural product e-commerce.

As the last virgin land of e-commerce, agricultural product e-commerce has already attracted the attention of many e-commerce platforms and internet giants. In 2014, local specialty agricultural products achieved huge growth with the help of e-commerce platforms, and the county economy became China's most dynamic economic unit. Large platforms such as JD.com and Taobao have already penetrated deep into rural China, laying the foundation for the development of rural e-commerce.

Today, tens of thousands of small and medium-sized enterprises are "hawking" agricultural products on platforms such as Taobao and JD.com. Data from Alibaba shows that in 2012, about 20 billion yuan in agricultural product transactions were completed on Alibaba's platforms, and in 2014 it was expected to reach 100 billion, showing a trend of rapid development.

Some traditional enterprises such as Zhengbang Group, Chuying Agro-Pastoral, and China Animal Husbandry Group are also exploring e-commerce marketing models. LeTV's cross-sector move into agriculture has made the fresh food platform an important part of it.

Lenovo's agricultural latecomer Joyvio even regards e-commerce as an opportunity to "overtake on the curve." Its leader Chen Shaopeng said: "We attach greater importance to e-commerce channels. It should be said that at this moment, including in the future, e-commerce will play a more important role and will become one of the main channels leading to consumers and reaching consumers, and one of the very pillar-like main channels."

Now, most agricultural product e-commerce operations still remain at the stage of merely treating e-commerce as a channel, and most agricultural product e-commerce is still at the stage of merely placing agricultural products on e-commerce platforms for sale. Agricultural operators must establish a concept: e-commerce is not Sun Wukong! It cannot solve all your problems!

For agricultural products to do e-commerce, first, they must make products, and second, they must make brands.

First, products. The lack of star products is a common problem of traditional agricultural enterprises. Traditional small and medium-sized enterprises often have many products, at least dozens, at most hundreds, and even products across industries. A single product may have sales of only several hundred thousand or one million yuan in a year. In the national market pie, it is simply impossible to speak of capturing the market or building a brand, and it has no position.

In the world of e-commerce, the characteristics of category oligopoly economics are especially obvious, and star products are even more important. When consumers identify the number one brand in a certain category of products, they will directly enter its brand name in the search bar to enter the store and purchase, which in turn drives sales of other related products in the store.

Product focus and creating a highly popular, highly traffic-driving hit product will be the only way to help agricultural products break through on e-commerce platforms!

Second, brands. Compared with traditional methods, the internet can complete the accumulation of brand awareness and reputation faster. Through viral spread on the internet, a brand can quickly achieve brand influence that traditional methods could only reach with more time and greater investment.

Before joining forces with Benlai Life, Chu Orange already had good sales locally, but Benlai Life fully excavated the brand story of Chu Orange, amplified and spread it with humanistic elements, and ultimately created the legend of Chu Orange.

Land transfer and confirmation of rights: agriculture under modern large-scale planting and breeding

The No. 1 Document pointed out that China's agricultural production costs are rising rapidly, and the prices of bulk agricultural products are generally higher than international market prices. How to innovate agricultural support and protection policies under the "double squeeze" and improve agricultural competitiveness has become a major test for China's agriculture.

From the rural perspective, constrained by the too-small contracted cultivated land area of a single household, farmers face difficulties in achieving sustained income growth relying on agricultural production. At the same time, food security remains a severe issue that China must face.

Therefore, China's agricultural planting and breeding must take the path of large-scale mechanized mass production. Only mechanized production can improve labor productivity, reduce unit product costs, increase the profit rate of grain production, and enter the era of Agriculture 3.0. If it is still carried out within the current land policy system, mechanized production will find it difficult to achieve economies of scale, and instead, due to the high fixed asset investment in mechanical equipment, it will increase production costs.

Three types of economic entities will obtain the dividends of agricultural scale reform. First, large agricultural reclamation groups, relying on existing resources and status, through methods such as mixed-ownership reform, can quickly accumulate resource enrichment that other enterprises find difficult to achieve, and enter the market stage with stronger market competitiveness. Second, existing local leading agricultural enterprises. Such enterprises have already accumulated local related agricultural resources and are mostly key targets of local government support, making it easy for them to obtain relative advantages in land transfer. Third, big players coming from across sectors. One major characteristic of agriculture is that the pie is large, and only scale can form benefits. Even if they see the opportunity, they must have sufficient funds to leverage agriculture. Cross-sector big players such as Xu Jiayin, Liu Chuanzhi, and Wang Jianlin have stronger resource advantages and can better grasp the opportunity of agricultural scale.

Agricultural hot frontier: informationized modern agriculture

Agricultural informationization pushes agricultural development to a higher stage. It is the frontier focus and hot field of agricultural modernization. Its degree of development is relatively low, and it is precisely a strategic opportunity period for enterprises to seize position.

From 2004 to 2015, 12 consecutive "Central No. 1 Documents" all touched on agricultural informationization content, and in the most recent three years, attention to agricultural informationization has increased even more. Examples include the Internet of Things, food safety traceability, and precision agriculture.

Now is an important time for the development of agricultural informationization.

First, technological development has reached a time when it can support the accelerated development of agricultural informationization. In rural areas, the internet has already fully penetrated, and the development of technologies such as remote sensing and big data has also laid a solid foundation for the development of agricultural informationization.

Second, at present, industrial capital has begun to pour into the agricultural field. Alibaba has already begun laying out agricultural e-commerce, and in the future industrial capital will lead the accelerated development of agricultural informationization.

In addition, policies such as land transfer will build a platform for the development of agricultural informationization. In order to establish a standardized land transfer market, land transfer management and services will also emerge as the times require, including various forms of land management rights transfer markets, land transfer service platforms, county-township-village three-level service and management networks, land transfer monitoring, information release, and policy consultation.

Informationization technology has opened up new business models and ideas for agriculture, enabling operators or consumers to connect more directly with land. Alibaba's "Jutudi" fully utilizes the internet platform to efficiently connect consumers with the land in farmers' hands. Through the e-commerce platform, farmers transfer land to an e-commerce company, the e-commerce company hands the land to local cooperatives for production and management, and Taobao users, through online reservations, subscribe to land use rights and obtain actual crop output. CITIC Trust's "Tianhe Agriculture" grain production model is that CITIC Trust transfers land through trust products to Tianhe Agriculture for operation, and Tianhe Agriculture cooperates with cooperatives and large grain-growing households in production and provides full-process management and services.