China’s COFCO to Enter Global Grain Super-League with Listing
China’s giant state-run grain trading company, COFCO, is planning to list within the next three to five years to advance it into the elite group of companies dominating global grain trade.
Through its $2.8 billion joint ventures with Noble Group’s agribusiness and Dutch grain trader, Nidera, COFCO has transformed itself from a procurement business into a grain trader with a global scale in just under a year.
COFCO chairman, Ning Gaoning states that it is the group’s wider goal to become a serious rival to the four giant, global “ABCD” grain trading companies of Archer Daniels Midland, Bunge, Cargill, and Louis Dreyfus, and that this IPO would help the group achieve this goal.
The Noble and Nidera deals were the biggest overseas acquisitions in China’s grain sector, and were a shock to the global industry – giving COFCO control of assets in the world’s top grain and vegetable oil producing countries and regions including Brazil, Argentina, Indonesia, and the Black Sea, enabling the group to supply China’s grain and edible oil demand independently of the four ‘ABCD’ traders.
For now, COFCO is aiming to create synergies between itself, Nidera, and Noble Agri prior to listing – at which point hopefully the market is stronger than it is currently.
After 11 years of increasing production, Chinese land prices, inputs, and water are all becoming more expensive, and policy makers will need to reassess the county’s self-sufficiency programs. 2014 was the first year that China’s agricultural budget was lower than the year before, meaning that the country will produce less, and will need to rely more on imports. Ning Gaoning adds that China’s agricultural imports are expected to increase from 120 million tons today to 200 million tons within ten years, with China’s soybean imports forecast to increase a minimum of 5% per year – the fastest of any agricultural product.