Lower listing threshold for agricultural enterprises, but challenges remain
In 2008, when the author was studying agriculture, forestry, animal husbandry and fishery companies, an expert on agricultural issues told the author: the performance of agriculture, forestry, animal husbandry and fishery companies was poor, they mainly relied on side businesses for support, and a large part of their profits came from government subsidies. He believed that a considerable number of them had fraudulent listings, and after listing they would raise a sum of money and then decide what to do next, either diversify, or simply sell the shell and walk away.
In recent years, many more agriculture, forestry, animal husbandry and fishery companies have listed, and at the time of listing they were immensely glamorous and chased by the crowd; but quite a few companies saw their performance begin to slide after two or three years, and some fell into a quagmire of losses from which they could not extricate themselves. When they were being chased back then, they felt like a sudden rise of a new force, bringing a new business or farming model, but in the end it proved to be nothing but a pipe dream.
Recently, because a listed company made a provision of several hundred million yuan for inventory losses on seafood products, agriculture, forestry, animal husbandry and fishery companies once again became a hot topic. In fact, similar incidents have occurred one after another in the agricultural sector before.
Some people believe that listed companies commit fraud because it is very hard to detect, just as it is easy to commit a crime when the streetlights are out; others believe it is because of the weather, as such enterprises are relatively strongly affected by climatic conditions, with too many uncontrollable factors, and because what is farmed are animals and plants, there can also be impacts from pests and diseases. All of this can only show that it is no small difficulty for the agricultural sector to achieve capital accumulation and high profits.
Going back 100 years, agriculture, forestry, animal husbandry and fishery were the main source of wealth for the whole world, not only feeding the world's main population, but also providing the main jobs; but today, the share of agriculture, forestry, animal husbandry and fishery in the economy has become smaller and smaller.
Take the A-share market as an example: there are only 83 listed companies in agriculture, forestry, animal husbandry and fishery, most of which have brands and enjoy brand premiums, and some of which also possess unique resources. Yet there are 2,571 companies in the entire A-share market, and the overall performance of these 83 listed companies is inferior to that of the entire A-share market, and these 83 are still the outstanding ones in agriculture, forestry, animal husbandry and fishery.
In fact, in China, agriculture, forestry, animal husbandry and fishery still provide the most jobs, but at the same time competition in the industry is brutal and the entry threshold is low. The number of competitors for any listed company in agriculture, forestry, animal husbandry and fishery is too great to count. And these competitors have low labor prices, and most do not calculate input costs, and in their annual returns they do not set aside their own labor input and capital input to calculate the detailed accounts. In the most fiercely competitive field of crop cultivation, there have never been listed companies, because there is a lack of soil for growing listed companies.
When the government subsidizes an industry, it may be hoping to support a promising emerging industry; it may also be because the income of practitioners in that industry is not competitive, while the industry is relatively important in the overall economy. The Chinese government is now also subsidizing agriculture, forestry, animal husbandry and fishery.
The ups and downs of agriculture, forestry, animal husbandry and fishery enterprises and the difficulty of creating miracles are characteristics of this industry, but listed companies are also fitted with the harness of the capital market, and in some systems this is not conducive to the development and financing of agricultural enterprises.
But some companies have indeed created miracles, such as some seed industry companies. The deeper reason is that they have mastered cutting-edge technology, are at the forefront of the industry, and have relatively standardized financial management, meeting the relevant requirements. Now the threshold for listing has been lowered somewhat, and many agricultural enterprises are also rubbing their hands and eager to enter the capital market and show what they can do. However, if agricultural enterprises want to go far on the road to listing, they still need to learn from the experience of these companies and form effective measures; only in this way can they successfully list and perform well.