China has merged its state cotton and grain reserves companies to create its biggest agriculture product group with combined assets of 1.47 trillion yuan (US$213bn), reports China Central Television (CCT).
The State Council approved the merger of China National Cotton Reserves Corp with China Grain Reserves Corp (Sinograin), the report on 12 January said.
The move is part of the country’s efforts to improve the competitiveness of its state-owned enterprises and speed up the sale of crop reserves.
CCT said China held about half of the world’s corn and cotton inventories and had large reserves of wheat, rice and edible oils after state support systems encouraged farmers to boost production and some mills shifted to cheap imports. Last year, the government ended its corn stockpile policy.
The release of old rapeseed oil from the state’s long-term reserve has also been a game changer in the vegetable oil market in 2016, according to Godrej International director Dorab Mistry.
At the 12th Indonesian Palm Oil Conference in November, Mistry said the State Reserve Bureau had continuously released rapeseed oil in the later part of the 2015/16 season totalling almost 2.8M tonnes, meaning prices did not rise as much as expected despite large productions losses in palm oil.
Last July, the State Council approved the merger of China National Cereals, Oils and Foodstuffs Corporation (COFCO) and Chinatex Corp, which would become a subsidiary of COFCO, China’s largest food processer, manufacturer and trader.
Chinatex core businesses are textiles and grains and edible oils, including the trading, processing and warehousing of soyabean, corn, wheat, rapeseed, soyabean oil and palm oil.
In the past two years, COFCO has been focusing on global expansion. It completed its buy-out of the Noble Group’s agricultural unit in March 2016 (see OFI News, March/April 2016) to form COFCO Agri, which trades and processes a wide range of agricultural products including grains, oilseeds, sugar, cocoa, coffee and cotton. It also agreed to buy a 51% stake in Dutch trader Nidera in February 2014.
However, the resignation of its CEO Matt Jansen at the start of January could lead to a shift in the trading strategy, according to a Bloomberg report.
The report quoted an industry consultant as saying that COFCO Agri would remain a sourcing arm of agricultural commodities but would not have international trading ambitions.
COFCO had been trying to create a global giant to rival the ABCDs (ADM, Bunge, Cargill and Louis Dreyfus) but suffered several setbacks including losing about US$200M due to the actions of a rogue trader and then discovering a US$150M hole in the accounts of its Brazilian unit, Bloomberg said.
COFCO vice president Jingtao Chi will succeed Jansen.
“Johnny successfully merge and consolidated three COFCO agriculture entities into a single platform that has produced a total turnaround in performance,” said COFCO president Patrick Yu. “We are confident that Johnny will lead COFCO to our next stage of growth.”