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China Secures Global Supply Chain

04/02/2014 @ 9:56am

Chinese state-owned grain trader Cofco Corp.'s back-to-back purchases of controlling stakes in two global agricultural commodities traders signal a maturing food security strategy for the PRC. After buying up global food supply, China is now securing a global supply chain.

In February, Cofco said it would buy a 51% stake in Netherlands-based grain trader Nidera NV. This week, Cofco and mainland private-equity firm Hopu Investment Management Co. moved to buy a 51% stake in the agribusiness division of Singapore-listed commodities trader Noble Group Ltd. for US$1.5 billion.

The deals give Cofco global infrastructure to move food commodities around the world.

"It makes all the sense in the world that Cofco, China, wants to be connected somehow, someway directly to the source," said Soren Schroder, chief executive officer of agriculture company Bunge Ltd., at the Financial Times Commodities Global Summit in Lausanne this week.

Chinese acquisitions of foreign agribusiness and food and beverage companies have increased dramatically over the past several years, from US$222 million worth of deals in 2008 to $1.4 billion in 2011, and a whopping $8.2 billion last year, according to Dealogic. Those deals have included Chinese pork producer WH Group Ltd.'s 2012 purchase of U.S. pork supplier Smithfield Foods Inc. for $7.1 billion; China Fishery Group Ltd.'s 2013 takeover of Peruvian fish exporter Copeinca ASA for $858 million; and Cofco's own 2012 purchase of Australian sugar producer Tully Sugar Ltd. for roughly $140 million.

But China has lagged in the ability to move and trade food, something Cofco's Nidera and Noble buys could fill.

"It makes sense that [China] will have a strategy to have a higher ability to acquire [grain commodities]," said Juan Luciano, chief operating officer and president of U.S. commodities trader ADM, also speaking at the Lausanne conference. "At the end of the day, they're going to be an importer."

More at The Wall Street Journal's MoneyBeat blog, http://blogs.wsj.com/moneybeat/

(END) Dow Jones Newswires

April 02, 2014 07:08 ET (11:08 GMT)

DJ With Cofco Acquisitions, China Builds Food Supply Chain -- WSJ Blog->copyright

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