July 29, 2011

Chinese agribusiness investments in South America, particularly in Brazil and Argentina have seen an exponential rise, according to a new report by Rabobank's Food & Agribusiness Research and Advisory (FAR) department.

China's investment projects in South American agriculture reflect a combination of factors: its interest in securing long-term food supplies and expanding its sourcing options; a move to diversify investment portfolios from US treasuries into commodities; and a possible response to an internal supply-demand imbalance.

China is aiming to secure the supply of agricultural products, especially grains and oilseeds, as it cannot meet its own demand for them. Several agriculture-related deals in South America - including its large concentration of soy production and vast quantity of available land and water resources - address China's food industry needs.

Due to stricter regulation of foreign land ownership in Brazil and Argentina, Chinese investors have changed their model to one in which deals are structured as infrastructure investments in exchange for crop offtake, rather than direct investment into farmland, the report said.

China has an ongoing need to secure soy and corn supplies that matches well with South America's productive strengths. With grain stocks at historically low levels, the world will continue to look to South America for incremental production. Brazil has more resources that could be put into crop production than any other country in the world. It also provides an enormous potential market for Chinese exports, the report added.