The Analysis of the Agricultural Investment Opportunities and Risks in 2008

Recently, experts argues that the agricultural investment opportunities are coming, and the opportunities are created by the upgrading of the generations in agriculture, not by the traditional; agriculture. It is estimated that only the food processing based on the agricultural products have a a huge market potential accounting 1 trillion Yuan.

1. The Agricultural Investment Opportunities
Agriculture mainly solves the problem of food including grains, chicken, fish and so on. In fact, agriculture has an enormous market, which has not been attached great importance by investors before. However, ever since 2000, everything has changed. The experts consider that there exist two factors. On the one hand, China’ s entry into WTO requires the agricultural to be internationalized, and the agricultural sectors protected by government be opened up to the world. On the other hand, Chinese agriculture should reach the international standard so as to enter into the international market.
As a matter of fact, our agriculture falls behind the international standard in a great degree, which means that the whole agriculture should be upgraded. The upgrading of agriculture brings good opportunities for investment, including coordinating industries, cultivating seedlings, animal epidemic prevention as well.

In recent years, a series of industries with high adding-value have been highly perused, such as green agriculture, eco-agriculture for sightseeing, livestock raising, aquatic breeding, gardening, agricultural products processing. With Chinese agricultural opening up, foreign investors may invest in Chinese agricultural industries. It is reported that, in 2006, many agricultural industries including the seedlings will be opened. Precisely speaking, the possible gross profits of the animal epidemic prevention may reach 70 percent, and the gross profits of seeds, 50 percent. So far, only over 20 organizations appointed by the stated have been producing epidemic seedlings; however, there will be much more after the opening up.

2. Biology Agriculture Bearing Opportunities for Business

The agriculture of 21st century is characterized with the rapid growth of new agriculture based on the biology technology, which needs enormous investment. Of course, it will also bring considerable returns. The experts of the science circle and economy circle universally consider that the rapid development of the global biology agriculture is the major tendency. Just as the investigation by the Department of Agriculture of U.S.A., the investment in the biology agriculture in the world has risen by 10 times since 10 years ago.
The biology technology breakthrough most possibly be shown in the biological seedlings cultivation, biological pesticide, and biological veterinary medicine.
As regards the biological seedling cultivation, the investigation by the Department of U.S.A shows that ever since the first genetic agricultural products went unto the market, the market size had been expanded to U.S. $20 billion 5 years later, in 2007, it reached U.S $60 billion.
The investment of biological pesticide are mainly shown in such aspects: owing to the fact that the custom of the pesticide import has maintained 3%, the impact of entry of WTO on the pesticide enterprise will be comparatively small, then it will bring opportunities to the enterprises majoring pesticide exports. After the entry of WTO, the traditional pesticide with high-poison, high-leftover will meet green rampart. Meanwhile, the national environmental polices will restrain the production of such pesticide, therefore, there will be enormous opportunities for the development of biological pesticide.
At the same time, the biological veterinary medicine is also retrained by the green rampart. The governments of all the countries promulgate the standards for the veterinary medicine leftovers of meat, therefore, many traditional veterinary markets are shrinking, while the biological pesticides with low poison and low leftover will be welcomed.
As the sector in direct relation with the security of animal food, the production and operation of the biological veterinary medicine will definitely be under the strict examination by the state, meanwhile, the requirements for technology and capital scale will be rather high, which will constitute entry obstacles for such high-profit sectors. SO far, the enterprises majoring in the biological veterinary medicine have achieved great profits.

3. The Agricultural Products Processing

In the past, the waste branches and leaves were treated as fuels. It is reported that the Zhongxing Wood Corporation in Gaolin county Shaanxi province finds that the surrounding farmers carry the waste branches of fruit trees there for business. A farmer says, “In the past, the waste branches of trees were treated as fuels or sold to the charcoal users at low prices. However, ever since the Zhongxing Wood Corporation received the branches at the price of 240 Yuan per ton, I have carried the branches here with vehicles specially, every time, I can get 500-600 Yuan with the branches picked up for free. Moreover, the purchase is through 24 hours without any arrear.”

It is said that so far the Zhongxing Wood Corporation has been the biggest enterprise of man-made board in West China, which produces 200,000 tons of high-density fiberboard per year, with the branches as the raw material. Now they receive about 1,000 tons of waste branches from the farmers every day, and pay 8,760 Yuan to the farmers every year.
According to the research, there are also great potential in other agriculture products, such as food processing, agricultural products packaging and so on.

4. Capital Promoting the Development of Agriculture

Capital will promote the development of agriculture, which can be demonstrated in the way of Mengniu Group. From the foundation in Augut, 1999 to 2007, Mengniu Group has achieved 15 billion Yuan.
Another aspect of the agricultural development is the green product. Nowadays people have higher requirements towards food. To get safe, healthy, and environmental green food, the enterprises of agriculture products processing should reach rather high level. Now there have been such kinds of good enterprises these years, some grow into leading ones in this area.
These leading enterprises cannot develop without support of the government and of the capital. Besides, foreign investment has advantages not only in terms of the capital, but also the integration of the management and technology, which is most valuable in China.


5. Risks in the Investments

Investors must consider the risks. In many people’s opinions, compared with the programs of science and technology, the investment in agriculture is much safer than the new introductions, because agriculture is related with people’s necessities and thus it has great returns.