21 May 2019
COFCO chairman Ning Gaoning has transformed the state-run company into one of the world's largest food companies. Photo: Bloomberg
COFCO chairman Ning Gaoning has transformed the state-run company into one of the world's largest food companies. Photo: Bloomberg

COFCO on the prowl for US agricultural assets

Chinese food giant COFCO Corp. is looking for acquisitions in the United States, the world’s biggest exporter of agricultural commodities.

Once the government arm for importing food staples, the state-run company has been transformed under the leadership of its charismatic chairman, Ning Gaoning, into one of the world’s largest food companies with food-producing assets on five continents, the Wall Street Journal said.

Last year, it spent US$2.7 billion to acquire Dutch grain trader Nidera BV and 51 percent of Noble Group’s agriculture unit, gaining footholds in the breadbasket regions of South America and central Europe.

“We want to get more involved in other parts of the world, especially in the Americas, where a lot of the grain is grown, shipped and exported to other markets like China,” said Paul Liu, COFCO’s head for North America.

The deals it is looking for could include acquisitions or partnerships with rivals to secure US ports and grain terminals, giving COFCO better access to the world’s largest source of corn and a top soybean grower, Liu said.

With a lock on China’s grain trade, COFCO has access to deep state coffers, providing US$10 billion for acquisitions, the newspaper said, citing company officials.

Its revenue last year was estimated at US$63.3 billion following the Noble and Nidera deals, but the company still lags behind the world’s three larger agribusiness giants, Cargill and Archer Daniels Midland of the United States and Louis Dreyfus Group of France.

The food giant also has to deal with competition at home. As a bottler of household edible oil, it is only second to Singapore’s Wilmar International Ltd., which supplies 55 percent of the Chinese market compared with COFCO’s 15 percent, according to the consultancy Shanghai JC Intelligence.

In its US push, COFCO could be facing bigger hurdles. Buying assets from larger players could come at a hefty price tag, while acquiring small properties may be difficult to consolidate, the newspaper said, citing analysts.

The Beijing-based company, with its direct pipeline to China’s growing food sector, could represent both a potential threat and an attractive partner for long-established US grain-trading giants.

Owning significant North American assets such as ports and grain terminals could enable COFCO to buy more grain at lower cost to supply its Chinese operations, reducing its dependence on the US grain shippers.

If a US company teamed with COFCO, however, it could secure direct access to one of the world’s fastest-growing food markets.

COFCO might buy or invest in existing grain-trading infrastructure, or form alliances with grain companies to develop new facilities, Liu said.

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