Observations and Reflections on the Phenomenon of Capital Crossing into Agriculture
Agriculture is a dialogue between life and life; the brilliance of life requires patient waiting, and it is inadvisable for capital to seek rapid wealth creation by replicating profit models from other sectors.
Evergrande recently announced in a high-profile manner its entry into modern agriculture. The planned investment of 100 billion yuan covers sectors such as grain and oil, livestock, and dairy. From the grain and oil products already launched, the target is still "green" and "organic," and the "sky-high" prices several times higher than market prices clearly indicate that it intends to take a high-end route. At present, Evergrande is focusing on recruiting agricultural professionals while starting to build and acquire production bases. Evergrande's move has once again sparked heated discussion. People are speculating whether Evergrande's "farming" will succeed, and are also pondering why capital favors agriculture.
From Wuhan Iron and Steel raising pigs to Lenovo planting and selling kiwifruit, from JD.com growing rice to China Minsheng Bank selling tuna, in recent years capital from various sectors has rushed to "seize a foothold" in agriculture, "blossoming across the board" from the coast to the interior. "Capital going to the countryside" is not only involved in traditional planting and breeding industries such as fruits, vegetables, livestock and poultry, but also favors ecological leisure and sightseeing agriculture, the promotion of biotechnology, and agricultural product processing. The actions taken include acquiring grain processing enterprises in major grain-producing areas, as well as jointly establishing orchard bases with farmers, building farms, and purchasing pig farms.
Why is capital from various sectors keen to cross into agriculture while operating its main business? Although behind this one cannot rule out the helplessness of "the price of one kilogram of steel not matching four liang of pork," from the reality of China's agricultural development, it should be more due to the encouragement of various policies that strengthen agriculture, benefit farmers and enrich farmers, and continued optimism about the future development of China's agriculture, making them unwilling to miss this rare development opportunity and investment opportunity. Moreover, from the history of agricultural development in developed countries, when agriculture develops to a relatively high level, the entry of industrial and commercial capital and financial capital is the general trend.
Capital can promote the transformation and upgrading of agriculture. Although China's policy system for strengthening agriculture and benefiting farmers and its agricultural development framework have basically been established, generally speaking the vitality of agricultural development is still insufficient, and the problem of the outflow of the three major factors of "land, labor and capital" is still relatively prominent. The advantages of capital, in addition to funds, also gather talent, management, technology and so on, which can bring a more efficient production model to traditional agriculture. In particular, capital's ability to combine management and technological factors, as well as modern organizational methods, are precisely the weak links in China's current agricultural development and what agricultural producers and operators most need to learn.
Capital may also bring harm to agriculture. Because developing agriculture is different from producing steel or building buildings; it faces living objects. The growth of life requires a process, and agriculture is destined to be a long-term industry. But capital pursues profit and craves rapid appreciation. After it enters the agricultural field, will it "in the name of agriculture" occupy farmland to develop non-grain industries and non-agricultural industries, threatening national food security and harming farmers' interests? Will it, although under the banner of "green" and "organic," in order to pursue rapid investment returns, either violate the natural laws of biological growth or relax requirements and control over product quality, increasing the risk of food safety incidents? Will it, in pursuit of high profits, use its strong financial strength to manipulate prices and increase the risk of abnormal fluctuations in the agricultural product market?
What needs to be kept in mind is that agriculture has never been an industry of windfall profits, and to this day it remains a relatively weak industry. Moreover, agriculture is a dialogue between life and life; the brilliance of life requires patient waiting. Those who underestimate various risks and want to pursue rapid wealth creation by replicating profit models from other sectors should think carefully before deciding whether to enter.