China’s Cofco to partner with Growmark on U.S. grain supply

Representatives from Growmark and Cofco have signed on for a new grain supply agreement. (Photo courtesy Growmark)

Reuters — China’s state-owned Cofco International Ltd. (CIL) and U.S. farm co-operative Growmark on Friday announced a new grain supply partnership which they say will enhance links between U.S. grain production areas and global markets, including China.

The partnership is the latest expansion move by CIL after it invested US$3 billion to buy Noble Group’s agribusiness and a large stake in Dutch grain trader Nidera in deals that bolstered its position in the international grain market.

As part of the deal, the companies said they will jointly own and operate a truck, rail and barge terminal in Cahokia, Illinois, on the Mississippi River, the main pipeline that supplies exporters along the U.S. Gulf Coast with corn and soybeans.

Growmark, which provides agronomy services, grain marketing and risk management services and retails crop inputs to farmers in over 40 states and in Ontario, will also assist in sourcing grain at Cofco’s St. Louis office as part of the partnership, the companies said in a statement.

The U.S. is the world’s largest corn exporter and No. 2 soybean exporter. China, the top soybean importer, is among the largest markets for U.S. agricultural products.

The companies did not disclose the terms of the deal.

“CIL aims to be and be recognized as a world-class global agribusiness,” CIL CEO Johnny Chi said in the statement.

Cofco said last year that it was seeking potential partnerships or acquisitions in North America, but Reuters has since reported that the company has struggled to integrate its large acquisitions and may not participate in a large-scale industry consolidation.

Large grain traders have been struggling with a global grain glut that has depressed crop prices and squeezed margins for the companies that aim to make money buying, selling, storing and shipping grain around the world.

Market leaders Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus, known as the ABCD quartet of global grain giants, have recently faced increased competition from smaller traders such as Cofco.

Cofco doesn’t have its own grain sourcing network in Canada but announced plans last summer to set up a grain trading office in Winnipeg.

Growmark’s grain marketing business in Canada, meanwhile, includes a stake in Ontario country elevator operator Great Lakes Grain.

Growmark in recent years has solidified its business in the Ontario market, buying full ownership of Ontario farm fuel retailer UPI Energy last fall and full control of the FS Partners ag retail chain in 2009.

Reporting for Reuters by Karl Plume in Chicago. Includes files from Network staff.

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