COFCO, GROWMARK Announce North American Grain Supply Partnership

China’s state-owned COFCO International Ltd. (CIL) and GROWMARK, the second largest farmers cooperative in the U.S., have announced a new U.S. grain supply partnership.

Under the terms of the deal, the two companies will have joint ownership, and will conduct joint operation of a barge, truck, and rail terminal on the Mississippi River at Cahokia, Illinois. The operation has the capacity to receive 180,000 bushels of corn per hour and can load two river barges at the same time at a rate of 60,000 bushels per hour.

“It’s a really impressive facility in an area where there’s a lot of grain that moves through on its way to the Gulf of Mexico,” Brent Ericson, GROWMARK, senior vice president, member business, told AgWired.

The companies also structured a grain origination agreement through which GROWMARK, which provides grain market, risk management, and agronomy services to farmers in more than 40 U.S. states and Ontario, will staff a grain merchandiser in CIL’s St. Louis office to originate grain and service accounts.

North American Push

Following COFCO’s complete acquisition of both Noble Agri and Nidera for a combined $3 billion, which gave COFCO a terminal near the active inland port of St. Louis as part of the Nidera acquisition, this move by COFCO is the latest reflection of an aggressive strategic push by COFCO into the North American grain sector - it’s single lacking market - as it strives to build a truly global presence.

In May of last year, COFCO Agri established its first ethanol trading desk in the U.S. and hired ethanol trader Aaron Parrish away from rival Louis Dreyfus. The move was seen as a means of entry to trade between the U.S. and Brazil, the top two ethanol producers in the world, as well as a way to better meet growing demand in China.

One month later the push in North American grain continued with COFCO Agri opening its first trade office in the center of Canada’s grain region in Winnipeg. Other major grain traders that currently have head offices in Winnipeg include Cargill, Richardson International, Paterson Grain, and Parrish and Heimbecker.

In support of the group’s expansion into Western Canada’s grain space, the company also hired three traders and an operations manager to oversee the growth of the group’s domestic and export trading activities.

Benefits

Given that the U.S. is the world’s top corn exporter and the second largest soybean exporter, and China is the world’s top soybean importer, this deal provides GROWMARK with a direct grain pipeline directly to end users on a top global market.

“The partnership positions the Growmark System for expanded access to value-added grain markets,” said Jim Spradlin, Growmark CEO. “U.S. agriculture exports to China totaled $21 billion in 2016. It is the world’s largest importer of soybeans, and is consistently ranked as our second largest agricultural export market.”

“Economics dictate where grain moves, but all things being equal this gives us a leg up in the Chinese market," said Ericson.

The tie-up also will secure more direct access to reliable and high quality grain supplies for China, which is always grappling with the question of future food security.

"The food industry has gained a growing influence in the country's economy over the past decade,” Ding Lixin, a researcher at the Chinese Academy of Agricultural Sciences, told China Daily. “China also needs more food to boost domestic consumption and facilitate ongoing supply-side structural reform."

Under this supply side reform, China Daily reports that COFCO’s media office in Beijing stated that this year the group will be focusing on advancing the construction of warehouses and logistics facilities throughout the top grain producing regions of the world including the U.S., Ukraine, Myanmar, Kazakhstan, and Indonesia.