Agricultural Product Export Opportunities in China www.srmconsultants.net
<ul><li>Large Land Acreage </li></ul><ul><ul><li>China has a significant  amount of arable land; 14.86%. </li></ul></ul><u...
<ul><li>Growing Rural Economy </li></ul><ul><ul><li>China’s GDP is also at an all-time high – $24.6 billion in 2007, up 11...
<ul><li>Lack of Mechanized Agricultural Products </li></ul><ul><ul><li>Demand for Tractors and Combines products are low r...
<ul><li>Need to Improve Agricultural Techniques </li></ul><ul><ul><li>Antiquated harvesting techniques play a significant ...
<ul><li>Small Sales Presence of Corporate Partners  (Caterpillar, Case,  AGCO and Deere) </li></ul><ul><ul><li>The number ...
<ul><li>Reasonable shipping charge: </li></ul><ul><ul><li>It would cost us $3,717.54 per container to ship to China. </li>...
<ul><li>Potential interest in used product </li></ul><ul><ul><li>Only large “state farms” have any kind of modern agricult...
<ul><li>Tariff and Taxes </li></ul><ul><ul><li>China charges 17% total duty.  This includes pay 4 percent for duty (Under ...
<ul><li>Inconsistent government policy/procedures  </li></ul><ul><ul><li>Government will one day allow for free passage of...
<ul><li>Long-term commitment </li></ul><ul><ul><li>Market is very young and need is there. </li></ul></ul><ul><ul><li>Chin...
<ul><li>Antiquated Spray Equipment </li></ul><ul><ul><li>Several factors impact this high usage, including a lack of under...
<ul><li>China’s Dependence on Agro-Chemicals </li></ul><ul><ul><li>China imported $337 million in fertilizers and $40.40 m...
<ul><li>Recognized Need for Fewer Chemicals </li></ul><ul><ul><li>Farmers still rely on smaller, less efficient sprayers t...
<ul><li>Pricing Strategy </li></ul><ul><ul><li>Loss Leader strategy. </li></ul></ul><ul><ul><li>Current mechanized Chinese...
<ul><li>Distribution Strategy </li></ul><ul><ul><li>China allows foreign companies to become export trading companies (cal...
<ul><li>Distribution Strategy </li></ul><ul><ul><li>China requires forming of another firm, called a foreign investment co...
<ul><li>Finance options </li></ul><ul><ul><li>U.S. Trade and Development Agency. </li></ul></ul><ul><ul><li>U.S. Export-Im...
<ul><li>Legal Issues </li></ul><ul><ul><li>Strict certification processes.  </li></ul></ul><ul><ul><li>Not many safety doc...
<ul><li>Plan visit to China and develop an agent relationship. </li></ul><ul><li>Confirm pricing and product features find...
Who we are… <ul><li>SRM is a network of professionals, experts in discovering opportunities, developing  markets, and brin...
Contact SRM Consultants to learn more about our global market development opportunities as well as other customized busine...
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Ag Exports To China

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Ag Exports To China - Research indicates a significant opportunity for used agriculture equipment in China.

The ag industry in China is evolving and this is just another huge opportunity for those who want a piece of the world's largest market.

SRM Consultants is a network of professionals, experts in discovering opportunities, developing markets, and bringing solutions to business clients from all over the US.

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Ag Exports To China

  1. 1. Agricultural Product Export Opportunities in China www.srmconsultants.net
  2. 2. <ul><li>Large Land Acreage </li></ul><ul><ul><li>China has a significant amount of arable land; 14.86%. </li></ul></ul><ul><ul><li>1.2% permanent crops. </li></ul></ul><ul><ul><li>A tremendous 545,960 acres of land is irrigated – one of the largest areas in the world. </li></ul></ul>Why China? www.srmconsultants.net
  3. 3. <ul><li>Growing Rural Economy </li></ul><ul><ul><li>China’s GDP is also at an all-time high – $24.6 billion in 2007, up 11.4% from 2006. </li></ul></ul><ul><ul><li>China has tripled their R&D into improving agriculture techniques over the past 20 years. </li></ul></ul><ul><ul><li>HSBC recently opened a branch location in a predominantly rural area with the intention of loaning money to rural Chinese citizens. </li></ul></ul><ul><ul><li>Chinese government to consolidate the land into larger farms, pushing farmers into cities. </li></ul></ul>Why China? www.srmconsultants.net
  4. 4. <ul><li>Lack of Mechanized Agricultural Products </li></ul><ul><ul><li>Demand for Tractors and Combines products are low right now; $9 billion in imports from US in 2007 with growth of only 38% for Tractors and only 1.4% for Combines from 2006 to 2007. </li></ul></ul><ul><ul><li>Chinese agricultural exports account for less than one-quarter of one percent of the total market value. </li></ul></ul><ul><ul><li>Product saturation in the market is not the issue - there are over 900,000 tractors in China, which is fives times fewer than in the US, despite having twice the irrigated land base. </li></ul></ul>Why China? www.srmconsultants.net
  5. 5. <ul><li>Need to Improve Agricultural Techniques </li></ul><ul><ul><li>Antiquated harvesting techniques play a significant role in this problem. </li></ul></ul><ul><ul><li>Statistics show that of the total arable land, 40% is victim to soil erosion and an additional 15% is contaminated with heavy metals. </li></ul></ul>Why China? www.srmconsultants.net
  6. 6. <ul><li>Small Sales Presence of Corporate Partners (Caterpillar, Case, AGCO and Deere) </li></ul><ul><ul><li>The number one importer of tractors to China is AGCO, according to their annual report (2008). </li></ul></ul><ul><ul><li>However, they are struggling. While they have a short-term strategy for growth, AGCO is taking a long-term view. They have no choice; they sold fewer than ten tractors to the market in 2007. </li></ul></ul>Why China? www.srmconsultants.net
  7. 7. <ul><li>Reasonable shipping charge: </li></ul><ul><ul><li>It would cost us $3,717.54 per container to ship to China. </li></ul></ul><ul><ul><li>Using door-to-door service to ship product from Fargo to Minneapolis. </li></ul></ul><ul><ul><li>Using custom broker services as that will help clear customs in China. </li></ul></ul>Why China? www.srmconsultants.net DESCRIPTION RATE QTY. AMOUNT Freight $2,300.00 1 $2,300.00 BAF Charges $120.00 1 $120.00 Warfage $2.90   $27.64 Bill Of Lading     $50.00 Drayage $785.00 1 $785.00 Fuel Surcharge     $109.90 Customs Fee     $275.00 Shipper's Declaration     $50.00 Total     US $3,717.54
  8. 8. <ul><li>Potential interest in used product </li></ul><ul><ul><li>Only large “state farms” have any kind of modern agricultural equipment. </li></ul></ul><ul><ul><li>One Tractor, one Combine, and one Sprayer for every 10,000 acres. </li></ul></ul>Why China? www.srmconsultants.net
  9. 9. <ul><li>Tariff and Taxes </li></ul><ul><ul><li>China charges 17% total duty. This includes pay 4 percent for duty (Under Most Favored Nation status) and 13 percent value added tax (VAT). Assuming cost of $27,000, the VAT is $4,590. </li></ul></ul><ul><ul><li>Additionally, small Businesses are subject to VAT at the rate of 6 percent. VAT is applied on CIF + duty. </li></ul></ul>Potential Barriers to China? www.srmconsultants.net DESCRIPTION RATE AMOUNT Equipment Cost   $ 27,000.00 Duty Tax (MFN) 4% $ 1,080.00 Used Equip Tariff 13% $ 3,510.00 Total Tax and Tariff   $ 31,590.00
  10. 10. <ul><li>Inconsistent government policy/procedures </li></ul><ul><ul><li>Government will one day allow for free passage of product, but might not the next day. </li></ul></ul><ul><ul><li>Corruption is rampant, but government is cracking down. </li></ul></ul><ul><ul><li>Right now, Government owns land, but is implementing a “land trading” system. </li></ul></ul><ul><ul><li>Government subsidizes farmers to purchase farm implement products with China as country of origin. </li></ul></ul>Potential Barriers to China? www.srmconsultants.net
  11. 11. <ul><li>Long-term commitment </li></ul><ul><ul><li>Market is very young and need is there. </li></ul></ul><ul><ul><li>China is not a “fast buck” opportunity. </li></ul></ul><ul><ul><li>Doing business is very different than from US. </li></ul></ul><ul><ul><li>A firm needs to take time and be committed long-term. </li></ul></ul>Potential Barriers to China? www.srmconsultants.net
  12. 12. <ul><li>Antiquated Spray Equipment </li></ul><ul><ul><li>Several factors impact this high usage, including a lack of understanding from farmers about agro-chemical usage and using inefficient equipment. </li></ul></ul><ul><ul><li>The Agricultural Sprayer is 4X faster than standard sprayer and up to 50% more effective. </li></ul></ul>Product: Agricultural Sprayer 1999 JD 4700 Sprayer www.srmconsultants.net
  13. 13. <ul><li>China’s Dependence on Agro-Chemicals </li></ul><ul><ul><li>China imported $337 million in fertilizers and $40.40 million in pesticides from the U.S. </li></ul></ul><ul><ul><li>Overall, pesticides account for more imports as a total percentage of imports than steel or copper. </li></ul></ul>Product: Agricultural Sprayer While China stopped exports on agro-chemicals, they also tripled their imports of these chemicals in the first nine months of 2007. www.srmconsultants.net
  14. 14. <ul><li>Recognized Need for Fewer Chemicals </li></ul><ul><ul><li>Farmers still rely on smaller, less efficient sprayers to apply their fertilizer. </li></ul></ul><ul><ul><li>These sprayers apply fertilizer at an average rate of 179 pounds of fertilizer per acre (this is the highest rate in the world). </li></ul></ul>Product: Agricultural Sprayer www.srmconsultants.net
  15. 15. <ul><li>Pricing Strategy </li></ul><ul><ul><li>Loss Leader strategy. </li></ul></ul><ul><ul><li>Current mechanized Chinese sprayer equipment on market $8,000 (new). </li></ul></ul><ul><ul><li>Heavy marketing – Demos, trade shows and traditional ad channels. </li></ul></ul>Agricultural Sprayer Marketing Overview www.srmconsultants.net DESCRIPTION RATE QTY. AMOUNT 1999 JD 4700 - 3150 HRS   1 $ 27,000.00 Shipping 1 $ 3,717.54 Duty Tax (MFN) 4%   $ 1,080.00 Tariff 13%   $ 3,510.00 Total Cost     $ 35,307.54
  16. 16. <ul><li>Distribution Strategy </li></ul><ul><ul><li>China allows foreign companies to become export trading companies (called foreign investment enterprises or FIEs). </li></ul></ul><ul><ul><li>FIEs allows for companies to import products free from some government controls. These are required to be established prior to distributing products. This requires registration and RMB 1 million in capitalization in order to obtain an import license. </li></ul></ul>Agricultural Sprayer Marketing Overview www.srmconsultants.net
  17. 17. <ul><li>Distribution Strategy </li></ul><ul><ul><li>China requires forming of another firm, called a foreign investment commercial enterprise – FICE. </li></ul></ul><ul><ul><li>Should employ a dedicated agent and local sales representatives. </li></ul></ul><ul><ul><li>The demanding market development strategy will require intensive human resources. </li></ul></ul>Agricultural Sprayer Marketing Overview www.srmconsultants.net
  18. 18. <ul><li>Finance options </li></ul><ul><ul><li>U.S. Trade and Development Agency. </li></ul></ul><ul><ul><li>U.S. Export-Import Bank. </li></ul></ul><ul><ul><li>U.S. Small Business Administration. </li></ul></ul>Agricultural Sprayer: Alternate Finance Options www.srmconsultants.net
  19. 19. <ul><li>Legal Issues </li></ul><ul><ul><li>Strict certification processes. </li></ul></ul><ul><ul><li>Not many safety documentation considerations. </li></ul></ul><ul><ul><li>No Conformite Europeenne (CE Marking). </li></ul></ul>Agricultural Sprayer: Alternate Finance Options www.srmconsultants.net
  20. 20. <ul><li>Plan visit to China and develop an agent relationship. </li></ul><ul><li>Confirm pricing and product features findings. </li></ul><ul><li>Begin process for forming FIE and FICE. </li></ul><ul><li>Locate an experienced master agent and local sales reps. </li></ul>Next Steps… www.srmconsultants.net
  21. 21. Who we are… <ul><li>SRM is a network of professionals, experts in discovering opportunities, developing markets, and bringing solutions to business clients from all over the US. </li></ul><ul><li>Since 2003, we’ve brought together powerful insights, innovative strategy, and strong leadership to help create value for our clients. </li></ul><ul><li>With over 50 years combined experience, we know the pitfalls and hidden treasures in business so we can offer you the best possible value. </li></ul>www.srmconsultants.net
  22. 22. Contact SRM Consultants to learn more about our global market development opportunities as well as other customized business solutions. www.srmconsultants.net

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