December 30, 2011


COFCO to strengthen logistics system worldwide


As part of its foreign investment strategy, COFCO plans to build up its global logistics and processing systems next year, handling products such as corn, soy, rapeseed oil, sugar and wheat.


"Some deals are now being negotiated. We will invest wherever it is necessary," Board Chairman Frank Ning said, suggesting the total amount could be huge. "We have laid the groundwork for expansion," he said, without giving further details.


In November, COFCO announced plans to invest overseas through mergers and acquisitions over the next five years. The company will focus on a number of foreign markets including the US, Australia and Southeast Asia, said Jiang Hua, a board member.


Ma Wenfeng, an analyst at a major agricultural consultancy, said now was a good time for foreign acquisitions.


As developed countries are struggling with a sluggish economic recovery, Chinese companies could make acquisitions more cheaply, Ma said.


"Overseas expansion will make COFCO more competitive in the global food industry," he added.


With COFCO's overseas network, China's processing companies could import agricultural products at lower prices, Ma added.


"This will give Chinese companies more leeway in the international food market," he said.


China is the world's largest importer and consumer of a number of agricultural products including cotton and soy. Analysts have forecast that the nation will become the world's largest food importer within the next five to 10 years.


According to the Ministry of Agriculture, China's agricultural trade surged to US$122 billion in 2010 from US$28 billion in 2001. Imports jumped to US$72.6 billion in 2010 from US$12 billion 10 years earlier, an annual rise of 22.3%.


A trade deficit in agricultural products also emerged and widened rapidly during these years. In 2010, China's trade deficit in the sector increased to US$23 billion from US$4.6 billion in 2004.


"With overseas investment, we could make use of resources in the international food market," Ning said.


Domestically, COFCO has expanded to cover agricultural production, processing and retailing. The company has so far cooperated with more than 1.55 million farming households.


The farmers grow crops on 233,000 hectares of farmland for COFCO's processing businesses.


"The farmers trust COFCO because we are a State-owned company. This is our advantage in competition," Ning said.


"We intend to foster a whole business chain from farms to consumers' tables, and we will continue striving to create value for farmers," he added.

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