COFCO Prepares to Better Compete with Global Grain Rivals
China’s population growth and demographic shift toward a larger middle class will mean a fundamental shift in consumer demand from low to high protein foods, higher demand for edible oils, and higher demand for soybeans for animal feed to increase the supply of beef, milk, pork, and fish.
Ning Gaoning, chairman of China National Cereals, Oils, and Foodstuffs Corp. (COFCO), states that China will need to pursue a mixed approach of mergers, acquisitions, partnerships, facility upgrades, and education in order to meet its food security needs.
The group is still seeking to build its grain and agricultural supply chains – especially the two global grain producing regions of in South America and the Black Sea, despite consolidation within the sector reducing the number of potential takeover targets. However, in order to better compete with global giants including Archer Daniels Midland (ADM), Bunge Ltd, Cargill Inc., and Louis Dreyfus, COFCO, China’s largest food trader is undertaking efforts to improve its logistics, food processing, infrastructure, and information collection methods.
In 2014, COFCO invested $1.5 billion to acquire a 51% stake in Hong Kong-based Noble Group, and a 51% stake in the Netherlands-based agribusiness group, Nidera BV, creating a fully integrated chain in world grain. This massive acquisition left COFCO with holdings valued at more than $70 million and 15 million tons of grain storage capacity spanning more than 60 countries. The group’s total food processing capacity has reached 84 million tons and it has the ability to ship 44 million tons of agricultural goods through the world using its multiple global ports.