Chinese state-owned agricultural trader COFCO is in talks over potential partnerships or acquisitions in North America, its president said, as it builds on deals that have already catapulted it into the league of top global traders. COFCO has embarked on an aggressive expansion into international grain trading, having invested over $3 billion to buy Noble Group's agribusiness and a large stake in Dutch grain trader Nidera, giving it assets in some of the world's top grain and vegetable oil producing regions.
It is now looking to build on that as China seeks greater access to food. COFCO's top priority was gaining export capacity in North America and it was already in talks for potential partnerships or acquisitions in the region, COFCO President Patrick Yu told Reuters in an interview on the sidelines of the FT Commodities Summit.
"We don't mind partners if they have assets or they have local origination capacity that serves the export market, that also works for us. So we are fully open, but definitely not purely trading companies, (we prefer) companies with strategic assets," Yu said.
US grain and soybean exports are dominated by the "ABCD" quartet of companies - Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus, the world's largest agricultural traders. From September, COFCO's stake in Nidera will rise to 65.5 percent from 51 percent as part of an earn-out clause, Yu said. It also intends listing together Nidera's agricultural assets and COFCO Agri, which includes the Noble agribusiness, in 2019, he added.
Rivals are closely monitoring COFCO's expansion. Earlier at the FT summit, Cargill's president of agricultural supply chain Gert-Jan van den Akker joked that even though COFCO was growing exponentially, in the top four "ABCD" traders the "C" is already taken by Cargill. COFCO's growth plans coincide with a government policy shift away from hoarding so-called buffer stocks, towards using land and water resources carefully, owning more infrastructure in grain and oilseed exporters to secure China's food needs.
"Where China is importing it makes a lot of sense if they have global origination capacity so that's why strategically you need COFCO Agri to expand into those areas to serve COFCO demand from China," Yu said. Yu said the government will release its strategic stocks in agricultural products from corn to cotton over the next three to five years. "Gradually the market will be much more ready for imports and COFCO has to be very competitive in terms of global supply chain," he said.
China recently scrapped policies supporting domestic corn prices after the country built up massive stocks. Yu declined to give an indication of how much money COFCO has to deploy in expanding its operations but said that over the next five years the entity would dilute its investments in property and financial areas to free up capital for agriculture. In the most recent agricultural deal, commodity trader Glencore sold a 40 percent stake in its agribusiness to Canadian pension fund CPPIB for $2.5 billion. Yu said COFCO had been interested in the assets in Australia and Canada but talks stalled because Glencore "wanted to stick to the whole piece" rather than breaking up the business.
Comments
Comments are closed.