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Denise Tsang

State-owned grain trader Cofco Corp's move to acquire the bulk of Noble Group's global food supply chain business for US$1.5 billion underscores its strategic responsibility in helping the central government stabilise food supplies and improve food safety and security.
Rapid urbanisation is putting pressure on the availability of arable land on the mainland, with 40 per cent of farms exposed to heavy metal discharges and increasing affluence stoking appetites for dairy, poultry and meat products.
China already has the world's biggest pig and poultry herds, leading to huge demand for feed grains in the international market.
"What happens in China could completely change historical patterns in global food trade," an HSBC research report said.
China's food security came to the fore after it was forced to import almost 10 million tonnes of wheat and several million tonnes of rice after bad weather battered both crops.

	What happens in China could … change historical patterns in global food trade

	HSBC
Of the nearly 40 million tonnes of soya beans exported by the United States since September last year, US data showed China bought 26.8 million tonnes or 67 per cent of the total.
Cofco, which leads a consortium including private equity fund Hopu Investments, agreed on Wednesday to buy 51 per cent of Noble Agri, a company set up in 1998 to trade and process agricultural products such as grains and oilseeds, cotton, cocoa and sugar. It is the smallest company in the Noble Group.
The deal marks the largest outbound acquisition in the food sector by a state-owned enterprise and the second deal Cofco has cut in recent weeks, having bought a majority stake in Dutch grain trader Nidera in February.
Cofco's partner in the Noble deal, Hopu, was set up by Fang Fenglei, the chairman of Goldman Sachs' Chinese securities venture, as a China-focused private equity fund in collaboration with Singapore's sovereign fund Temasek.
Cofco chairman Frank Ning Gaoning said the acquisition would allow the group to better control costs by making Noble Agri "the principal international origination platform" without going through the ABCD pipeline. He was referring to the four biggest trading houses of ADM, Bunge, Cargill and Louis-Dreyfus.
"Noble Agri's supply chain management system and origination capabilities complement Cofco's logistics, processing and distribution network in China," Ning said.
Commodity traders are sceptical Cofco can completely squeeze out the four leading trading houses. Cargill and ADM are major players in the US grains market and around the world while Bunge is a well-established trader in oilseeds.
The US is the world's top grain exporter and Noble's presence there is dwarfed by its rivals.
Noble's strength is in oilseeds given its presence in Southeast Asia and South America, but its margins have been squeezed by bumper supplies of palm oil from top producers Indonesia and Malaysia and large crops of soya beans in Brazil and Argentina.
Cofco, founded in 1949, the year Mao Zedong's Communist Party came to power in mainland China, is the nation's dominant foodstuff supplier with four companies listed in Hong Kong and three on the mainland stock exchanges.
Cofco is the latest mainland firm to grab world spotlight in the past year, following the US$4.7 billion acquisition by Shuanghui International, the nation's biggest meat processor, of US pork producer Smithfield Foods.
The Smithfield assets have been bundled into a new company called WH Group, which is seeking to go public in Hong Kong for US$6 billion in proceeds in the next couple of months.
For Noble, founded by chairman Richard Elman in 1987, the alliance with Cofco cheered investors. The company's share price in Singapore has gained 10 per cent in the past two days, closing at a 17-month high of S$1.315 (HK$8.08) yesterday.
Rating agencies Standard & Poor's and Moody's Investors Service find the deal positive for Noble in terms of disposing of its smallest unit and for financial and business reasons.


Cofco's Noble deal underscores role

Cofco Corp's purchase of agricultural trader Noble Agri is the mainland state-owned company's second deal in recent weeks. Photo: Getty

Business

China Business

Takeover of agricultural trader to help mainland maintain stable food supply and improve safety


State-owned grain trader Cofco Corp's move to acquire the bulk of Noble Group's global food supply chain business for US$1.5 billion underscores its strategic responsibility in helping the central government stabilise food supplies and improve food safety and security.
