China’s largest food processor and manufacturer COFCO has partnered with state-owned grain company Sinograin to establish two joint ventures in grain storage and oilseed crushing and processing, according to a release issued by the nation’s top asset regulator reported by Global AgInvesting.
Founded in 1949, COFCO Group has become the country’s top food processor, with fully integrated chains for grain trading, rice processing, oil processing, corn processing and sugar trading and processing, along with brands, ports and wharves, equipment, storage and logistic capabilities, according to the report.
Sinograin was formed in 2000 and now oversees 98% of the country’s total grain reserves.
For years, COFCO and Sinograin have provided China with what it calls “two-wheel drive” advantages, with COFCO taking a market-orientated approach, and Sinograin taking a more policy-focused approach, according to the 10 February report.
The joint ventures were designed to account for overlapping businesses, the report said, with the first being a grain storage business that would be controlled by Sinograin and the second an oilseed crushing and processing business, to be managed by COFCO.
“It is the first professional integration project this year. Another innovative move to use each director’s strengths, improve the efficiency of resource allocation, and better maintain national food security,” Weng Jieming, member of the state-owned Assets Supervision and Administration Commission, said.
“The equity cooperation between the two will help further rationalise the functional positioning and management boundary of grain storage and oil processing businesses of the two companies,” Weng added.
Sinograin president Deng Yiwu told China Daily that based on the structures of the two joint ventures, the grain reserve business would solidify its position managing the country’s central grain reserve, and would keep pace with grain collection and storage policies, management, sales and transport, while the combined oilseed business would improve competitiveness.
Most of China’s key state-owned companies have evolved from former monopolies that had since come under central planning, resulting in overly large businesses, Global AgInvesting wrote.
The move to combine COFCO’s and Sinograin’s operations would position COFCO as more of a rival to the world’s top agribusinesses – Archer Daniels Midland (ADM), Bunge, Cargill, and Louis Dreyfus Company (LDC), according to the report.