The false prosperity in the agricultural inputs industry is fading, and the market is gradually becoming more rational
The development of an industry, besides raising the production capacity of the industry itself, also brings broader effects in the capital market. For example, when the price of garlic rises, naturally more people invest in growing and selling garlic. The earlier phenomena of "garlic you ruthless" and "ginger you army" were in fact an extreme manifestation of the role of capital. So are there hidden concerns behind the investment boom in the agricultural inputs sector? Zhang Ziyu, special commentator for China Rural Voice, believes:
Zhang Ziyu: In the agricultural inputs sector, there have also been some investment booms in recent years. In recent years, the level of agricultural development has been rising continuously, and the demand for fertilizer has also been increasing, so fertilizer companies have been expanding production capacity one after another, looking for opportunities to go public.
But agricultural products have price rises and falls, and industrial development also has ebbs and flows. Judging from the situation in the first three quarters of this year, among more than 30 listed fertilizer companies, most were operating at a loss.
Why would fertilizer companies lose money? There are many reasons. On the one hand, international agricultural product prices have been relatively sluggish recently, and the international economic situation also involves great uncertainty. For fertilizer companies, business is difficult, so their strategies tend to become more conservative. On the other hand, competition in the domestic fertilizer market is becoming increasingly fierce, which also brings pressure on companies' research and development and sales. Put the two factors together, and they lead to stagnation in the development of fertilizer companies, with capital flowing to more active industries, resulting in poor performance for fertilizer companies.
The same situation also exists in the field of agricultural product e-commerce. Many friends probably still remember that a few years ago various fresh food e-commerce businesses developed rapidly, and many farmers also gained better incomes because of this. However, within just one or two years, these fresh food e-commerce businesses closed down one after another. A careful analysis of the business models of these fresh food e-commerce businesses reveals that, in fact, quite a few of them were burning money. Once investors' funding could not keep up, the entire industry would run into problems.
Whether it is fertilizer or e-commerce, neither can do without the support of capital. Appropriate investment can push the entire industry into a stage of rapid development, while overheated investment, or too little investment, will both bring adverse effects on industrial development. Judging from the previous situation, both fields had a lot of hot money, that is, financial capital seeking short-term profits. Now we have seen a decline in industrial growth, but this is in fact a return to normal.
For agriculture, because the industrial cycle is relatively long, sharp rises and falls are not very likely to occur, but the rapid fluctuations in related industries such as agricultural inputs and e-commerce will still bring uncertainty to agricultural development. Preparations should also be made for this.
Agricultural inputs such as fertilizer affect the production of every household, which requires management departments to have an accurate grasp of macro policies. In fact, China has a complete fertilizer purchase and storage mechanism. This kind of macro-control mechanism can effectively stabilize fertilizer prices. When industrial fluctuations are relatively large and external factors are complex, management departments can consider activating the relevant mechanism when necessary.
As for e-commerce, an industry directly related to the sale of agricultural products, it is important to understand that rises and falls in industry development are normal. In the face of industry fluctuations, it may be better to slow down a step, and the effect may be better.
As the saying goes: Capital is a good thing, it can add vitality to real industry, adjustment and decline are also normal, and there is no need to rush over industry rises and falls.