February 12, 2010

South Korean farm trade firm to set up grain company

The Korea Agro-Fisheries Trade Corp aims to set up an international grain purchasing and distribution company so that South Korea can be better protected from global price hikes.

The plan aims for the new company to establish an international distribution network in the next 10 years, said officials at the Korea Agro-Fisheries Trade Corp. This would allow the company to purchase products directly from farmers in foreign countries and distribute the corn, soy and wheat around the world.

The company can also invest directly in foreign farms or control stakes in agricultural operations, the officials said.

A recent report by the Korea Rural Economic Institute (KREI) said South Korea is overly dependent on large multinational companies that control the global grain market. The report also said that the country often paid more for grain purchased through those companies than it would have on the open market.

The new company can be set up initially with KRW200 billion (US$173.1 million), which would also allow it to purchase grain elevators or silos near areas of production and at harbours, and allow it to engage in trading activities at the CBOT.

The officials said operations and investments will be centred in untapped regions such as Southeast Asia, Central Asia and South America.

Participation in the Ukraine wheat and bean markets may be possible, with similar efforts to be made in such countries as Kazakhstan, Indonesia and Argentina, they added. In Brazil, the corporation may consider buying a local grain company to gain market access.