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There Are Three Main Directions of Transformation of Agricultural Materials Companies

China Agriculture Report By CnAgri2017-08-29 09:24:09China Agriculture Report Print On the one hand, the government requires to achieve zero growth in use of pesticide and fertilizer by 2020. Due to fierce competitiveness in agricultural materials industry and a drop in profitability, the companies need to open up a new way, focus on creating, adjust product structure and change the models; on the other hand, along with diversified demands on agricultural materials supply and service from accelerating land transfer, agricultural informatization, scaled and centralized agricultural planting and the rise of new-type operators, agricultural materials companies must adjust strategic directions in order to cope with new demand changes.


There are three main directions of transformation of agricultural materials companies: 


The first one is to extend to downstream planting industry. Compared to trillion-RMB agricultural materials market, the market size of agriculture reaches 5.5 trillion RMB. Agricultural materials companies extend to the downstream, which is beneficial for widening the sources of profit. For example: Heilongjiang Longhe Agricultural Development set up by Heilongjiang Beifeng Group has own planting base with an area of 35,000 mu, rice varieties, technical planting teams, constant-temperature and constant-humidity warehouses and the whole-process quality management and control model with advanced processing equipment, in order to build “Longdao rice” brand; Yangfeng Peirun Eco-Agriculture built by Hubei Xinfengyang sets up apple bases in Luochuan of Shaanxi, navel orange bases in Leibo of Sichuan and also acquires a 30,000-mu farm in Australia to build “Peirun” agricultural products brand.


The second direction is to upgrade product structure. Common products have fierce competitiveness, but new-type and efficient products such as water soluble fertilizer, nitro-based fertilizer and slow/controlled release fertilizer have better prospects, so the companies are gradually launching high-end and differentiated products and optimizing product structure to improve profitability. For example: currently, Kingenta’s NPK capacity have reached 6.45 million MT/year, of which 60% are new-type and high-profit varieties, such as controlled release fertilizer, nitro-based fertilizer and water soluble fertilizer; Huachang Chemical takes “persist in fertilizer and fertilizer going-out” as strategic concepts. While maintaining N-fertilizer production, it focuses on creating environmental friendly and efficient fertilizers to form the pattern taking new-type fertilizer such as new and nutritional topdressing and stabilized fertilizer as the core, and formulated and special fertilizers as the leading edge.


The third direction is to deepen agricultural service. Taking foreign developed countries as reference, domestic agricultural materials companies can supply integrated products by using existing sales channels, which is good for reducing farmers’ purchase costs and improving customer stickiness; provide supply-chain finance service to dealers and growers by cooperating finance companies to widen profit points; provide agricultural informanization and O2O platform service by using precise agricultural techniques; build comprehensive agricultural service platform and provide planting solutions to farmers. Jinfeng Community Agricultural Service Platform set up by Kingenta is positioned to become a planting solution supplier, providing the whole-process service to farmers, such as land improvement, the whole-process crop nutrition solutions, crops’ quality improvement, farm machinery selling and lease, aggro-technical training and guidance, etc.; Stanley Agricultural Service Co., Ltd set up by Stanley provides a full set of comprehensive agricultural planting solutions to new-type agricultural operators. 

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