COFCO hungry to rival global grain giants

Acquisitions to ensure food security and create a world leader in supply chains and transport

State-owned China National Cereals, Oils and Foodstuffs Corp has set a target of sourcing up to 50 million metric tons of grain from overseas markets by 2020 to further ensure China's grain security, its chairman Zhao Shuanglian says.

These international markets include South America, Australia and Europe.

The country's biggest food trader has also set goals to be able to process 30 million tons of corn, 20 million tons of soybean, 10 million tons of rice and wheat, and 5 million tons of sugar by the end of the 13th Five-Year Plan (2016-20).

"COFCO has invested more than $3 billion in global markets over the past two years and expanded its investment activities from grain to other foodstuffs such as meat, edible oil and milk and beverages," Zhao says. "We will become a strong rival to compete with the ABCD companies."

The term ABCD refers to the companies that dominate global grain trading, serving as middlemen between farmers that grow crops and buyers such as food producers. The groups are ADM Co, Bunge Ltd and Cargill Inc, all of the United States, and the Netherlands-based Louis Dreyfus SAS.

Zhao says COFCO will focus on acquiring or merging with firms that can help solve food shortages at home and further improve its capability in maritime transportation, as well as the entire supply chain services in seed, pesticide and fertilizer businesses over the next five years.

Oilseeds, such as soybean and rapeseed, and feed stuffs will be the company's main focus, because China's grain inventory is already at historic highs, including an estimated 250 million tons of corn after 12 consecutive years of increased production.

COFCO's prime target markets are South America and North America, and areas along the Black Sea in Europe.

The company has more than 10,000 employees from more than 70 countries and regions working in various overseas markets, mainly in Asia, Latin America and Europe.

Zhao says COFCO is keen to play a bigger role in China's agricultural sector supply-side reform. The reform includes a series of policies to improve the manufacturing and agricultural sectors, public services, environmental protection, quality and scale of production, and further opening up of Chinese markets for foreign investors.

"Our domestic grain processing and sales network will help absorb stocks," he says. "But we still need to make sure our supply chain is ready when the country's supply-side reform is complete."

COFCO announced in March it had taken full control of Noble Agri Ltd after buying the remaining 49 percent of the company still owned by Noble Group, the Hong Kong-based global supply chain manager. Noble Agri has been renamed COFCO Agri.

"In the long run, Chinese consumers' daily diets will shift from low-protein to high-protein food," says Ding Lixin, a researcher at the Chinese Academy of Agricultural Sciences in Beijing. "Exports of edible oil will increase, while soybeans will increasingly be used as animal feed to boost pork, beef, fish and milk output."

zhongnan@chinadaily.com.cn

(China Daily Africa Weekly 06/17/2016 page30)