China Agri-Industries Holdings, a Hong Kong-listed unit of the mainland's largest food importer and exporter, is seeking overseas acquisitions to secure supply lines of grain as commodity prices continue to surge worldwide.
'The surging prices of grain globally are the catalyst for us to adopt such a strategy,' China Agri vice-president Andy Li said in an interview.
He said the oilseed-processing and biofuel subsidiary of China National Cereals, Oils & Foodstuffs Import & Export Corp (Cofco) now planned to make strategic downstream investments in global grain producers and had been looking at possible targets.
The strategy is in line with recent moves by mainland energy and mineral companies to protect and secure raw material supply lines. Mr Li declined to specify the downstream producers China Agri had in its sights.
The company uses a range of organic inputs to produce biofuels and biochemicals and also processes oilseed and wheat, as well as makes malt used in the brewing of beer.
Yang Lei, an analyst at ABN Amro, said producers of soya beans, the major raw material input for China Agri's oilseed processing business - the biggest profit earner for the group - could be among the takeover targets, as well as barley producers.
China Agri imported four million tonnes of soya beans last year, or 83 per cent of its 4.8 million tonne bean-crushing capacity. It imports soya beans mainly from Brazil, Argentina and the United States.
The mainland, which has a policy of achieving self-sufficiency in grain supply, has been hit hard by surging soya bean prices as it imports about 70 per cent of its requirements and prices more than doubled last year.
'Overseas acquisition is a mid-term strategy for the company,' said Ms Yang. 'In the near term, [the firm] could definitely benefit from government policy to curb foreign players' fast development.'
China Agri is the mainland's second-biggest vegetable oil producer following Singapore-listed Wilmar International. The top five suppliers command a 60 per cent share of the mainland market.
China Agri has announced plans to spend HK$1.09 billion to expand production capacity by 3.45 million tonnes this year in the oilseed-processing business to capitalise on the growing demand for soya bean oil on the mainland.
The expansion plan will take the company's total production capacity to 9.48 million tonnes by year-end.