Growing in greener pastures
China Daily | 8 June 2012
By Zhong Nan
With demand for food rising with China's growing population and economy, domestic companies are looking to boost investments in resource-rich foreign countries such as Brazil and Indonesia to fill the food supply gap at home.
Leading State-owned grain company Chongqing Grain Group Co Ltd (CGG), which started growing soybeans in the northeastern Brazilian state of Bahia in 2008, shipped 400,000 tons of soybeans last year to China that was processed into 80,000 tons of cooking oil.
Shipments of soybeans from Brazil, the second-largest soybean producing country after the United States, will increase this year to 1.5 million tons, according to the company.
The soybean harvest from the 200,000-hectare farm in Bahia produces edible oil for Chongqing and cities in China's southwest region.
As a part of an investment program of $500 million (402 million euros) announced in November, CGG is also building a soybean industrial base in Bahia, which is expected to be operational by the end of this year. Its expected annual capacity is 1.5 million tons of oil for not only the Chinese market but also Brazil.
"Per capita income and the number of middle class will continue to soar in China. The biggest attraction of investing in abroad is that domestic demand is strong for all sorts of agricultural products. Products like soybean, corn, beef and pork to a certain extent have become more dependent on foreign markets," says Hu Junlie, president of CGG.
China imported 19.8 million tons of soybeans from Brazil in 2011, accounting for 38 percent of China's total imports (52 million tons) from supplying countries, according to the Ministry of Agriculture. This helped Brazil surpass the US as the biggest soybean exporter to China.
Brazil is rich in resources such as fertile land and water. Brazil heavily relies on imports and the Brazillian government is encouraging foreign businesses to invest in the nation's agricultural sector, says Lu Bu, a researcher specializing in agricultural resources at the Chinese Academy of Agricultural Sciences.
"We will continue to seek out more agricultural investment opportunities that are profitable abroad," Hu says. "Our new products will range from farming to processed foods. CGG will set up a soy refinery and processing plants for bio-diesel fuel and soy lecithin products within the next two years in Brazil."
CGG's next move is to grow soybeans on a 130,000-hectare farm in Argentina's Chaco province with a total investment of $420 million. The first phase will cover 106,000 hectares of farmland.
CGG is not alone in its interests in Brazil. The Zhejiang Fudi Agriculture Group and the agricultural bureau of Heilongjiang province have also invested $158.4 million to form a joint soybean-growing venture with a Brazilian partner to establish two farms in the north and south of Brazil, according to the Zhejiang provincial commerce department.
Lu Bu says the majority of Chinese companies import soybeans through four large international grain dealers - ADM Co, Bunge Ltd, Cargill Inc and Louis Dreyfus SAS.
"However, if Chinese importers could purchase from foreign producers or become producers in foreign country, around 20 percent of their costs can be saved," Lu says.
ZTE Energy Co Ltd, a Chinese company that makes products in various industries, from solar energy panels, cell phones to agricultural products, has also found ways to supply China's needs for palm oil in Indonesia.
ZTE Energy purchased two palm oil companies in Indonesia's Kalimantan Island with 30,000 hectares of farmland in 2009. About 13,000 hectares are planted with palm trees. With a $100-million investment, the company is expecting to produce 50,000 tons of palm oil by the end of this year.
In 2011, 50 million tons of palm oil were produced globally and more than half of that output came from Indonesia. Indonesia has surpassed Malaysia to become the world's largest palm oil producing nation, according to a report released by the Food and Agriculture Organization of the United Nations this year.
"We have discovered that more foreign investors are interested in investing in the palm oil business. About half of the palm plantations operating in Indonesia are foreign investment projects," says Cui Yaping, vice-president of ZTE Energy.
"China needs a certain percentage of food and food-related products from abroad. We see our role in that, we can grow agricultural products in suitable countries and bring them back to the domestic market to meet the (food) demand," Cui says.
China feeds more than 20 percent of the world's population despite having less than 10 percent of the world's agricultural land and less than 6 percent of the water resources, according to the agriculture ministry. Increasing agricultural investments overseas could help China ease the pressure to find more natural resources in the country and strengthen its food security.
"With diversified agricultural investment measures in abroad, I am very confident that the balance of supply and demand will be met in China. For investment, technology, local farmer education and logistics are all key factors. You must keep in focus. You have to commit and deploy to fight new challenges," Cui says.
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