The agricultural industry chain follows the smile curve: big agriculture may become the next wind.

Is it time to invest in modern agriculture?

Our reporter Wang Di / Wen

The deep excavation of the value and added value of agricultural products and the extension and expansion of the industrial value chain provide a broad investment platform for PE/VC.

Modern agriculture is becoming an important and new growth point of China's economy in the future.

Agriculture is not only related to people's livelihood, but also related to people's quality of life and attitude. Although China's agriculture has made great progress in the past 30 years, the overall level of development still lags behind. There are not only the constraints of natural capital sources, but also the shift of the center of gravity of the economy and policy. The diversified and rich consumer demand and the increasingly serious problems of food and food security are promoting the transformation and upgrading of China's agriculture to the pattern of marketization and modernization. This is an important reason why large-scale agriculture has gradually become a hot spot of investment.

Big agriculture, the next tuyere?

Since 2004, the No. 1 document of the Central Committee has paid continuous attention to agriculture, rural areas and farmers for 11 consecutive years, especially the abolition of agricultural tax in 2006 and the new government clearly put forward that modern agriculture will become an important and new growth point of China's economy in the future. This is something we didn't have before.

With the expansion of consumer market and the progress of agricultural science and technology, the deep excavation of the value and added value of domestic agricultural products and the extension and expansion of industrial value chain provide a broad investment platform for PE/VC, especially in areas such as high-end food consumption market, agricultural e-commerce, seed industry, cold chain logistics, Internet of things and so on.

With regard to investment opportunities in large-scale agriculture, Li Wei, chairman of Shenzhen-Hong Kong Industry-University-Research Venture Capital and a member of the executive committee of the "China Agricultural Science and Technology Innovation and Entrepreneurship Competition", said in an interview with the "financing China" reporter, "under the conditions of market economy, the agricultural industry chain follows a law-- that is, the smile curve. Before the scale of agricultural industrialization reaches a certain extent, investment opportunities are concentrated at both ends: provenance, high-end agricultural technology, agricultural equipment, high-end pesticides and other agriculture-related enterprises; market and consumption at the other end. "

Sun Dongsheng, president of Shenzhen Venture Capital and member of the executive committee of the China Agricultural Science and Technology Innovation and Entrepreneurship Competition, said: "from the general understanding of the investment industry, agricultural investment is a process of stable growth. However, this does not rule out local breakthroughs: in terms of technological innovation, information innovation, and service innovation, it may also bring explosive growth to a subdivided industry or specific enterprises."

"the return on investment in agricultural enterprises is expected to be adjusted and cannot be simply compared across industries. At present, the scale of agricultural enterprises is generally small, and it is the right time for VC/PE investment. With the process of rural land transfer and the further integration of agriculture and modern service industry, it is not impossible for agricultural enterprises to achieve explosive growth in the general sense after three to five years. Ren Liji, chairman of China Agricultural Science and Technology Innovation and Entrepreneurship Competition, is full of confidence.

Speed up the influx of venture capital

At present, from the perspective of the whole field of agricultural investment, the main investment targets of PE/VC are mainly concentrated in the basic planting and breeding industries related to the national economy and people's livelihood. This reflects that with the rise of the middle class and the upgrading of consumption structure, agricultural products are no longer limited to meet the survival needs of consumers.

From the point of view of the investment stage, PE/VC 's investment in agriculture is mainly concentrated in the period of development and expansion, while the investment in enterprises at the beginning and end of the industrial cycle is limited. In recent years, PE/VC investors have become more confident in companies in the stage of development and expansion, less interested in companies entering the profit period, and cautious about investing in early-stage agricultural companies.

With the promotion of rural land transfer and the wide application of Internet information technology, new operation modes and additional / value-added services are emerging in the agricultural industry. All this will not only bring new investment opportunities, but also bring us a more mature agricultural industry in the future.