July 9, 2009

Japan trading firms eye China grain market

Trading firms in Japan are looking to form business partnerships with foreign grain firms in order to secure a greater share of the growing Chinese grain market.


In May, Japan's largest grain trading firm Marubeni Corp. formed partnerships with Brazilian grain dealer Amaggi and Argentine food company Molino Canuelas. Marubeni also plans to expand its channels for procurement and sales in Russia and eastern Europe through mergers and acquisitions.


In June, Itochu Corp. established a grain export base on the West Coast of the US with major US trading company Bunge Ltd and other partners.


Mitsubishi Corp., meanwhile, is looking for a business partner in South America with a view to strengthening grain collection and shipping operations.


Large quantities of grains procured by Japanese trading firms from overseas are sent to Asia, including shipments of soy to China, which have been increasing noticeably.


Rapid economic growth in China has led to rising urban populations there, while changing eating habits indicated an increase in consumption of meat and cooking oil.


These trends have led to increased demand for soy cake and meal for livestock and for soy used to make cooking oil. China's production of soy is unable to meet domestic demand, causing it to become dependent on imports.


About one-third of soy traded worldwide are bound for China. Yet China is still forecast to face an 11 million ton shortage of soy in 2010 and a 28 million tonne shortage in 2020.


China is now virtually self-sufficient in wheat and corn, though in the mid- to long term the country also is expected to increase imports of these grains to keep up with rising demand, a Mitsubishi Corp. official said.


Japanese companies also are trying to ensure they can find stable buyers in China.


Marubeni formed a business tie-up with the Sino Grain group, China's state-run corporation for stockpiling grain. Through the deal, Marubeni aims to provide 10 percent of the soy used for producing cooking oil in China, and to secure sales channels for soy oil and palm oil.


Itochu, for its part, holds a 20 percent stake in Ting Hsin, a major food retailer operating in China and Taiwan, and hopes to establish a system covering the entire supply chain, from procurement of grain overseas through production and sales of food items in China.


Japanese firms hope that through partnerships with foreign companies they will be able to exploit increasing demand and compete with major grain trading firms in the future.