China’s COFCO penetrates deeper into US market by forming grain partnership

Agreement with Indiana-based cooperative Growmark is designed to complement the state-backed firm’s existing North American export capacity with the ability to source US grain.

Agricultural cooperative Growmark has formed a partnership with COFCO International, the trading arm of China’s state-owned agricultural investment holding company.

The companies said in a joint statement that the tie-up aims to connect North American farmers to global feed and food markets. The statement also noted that the partnership includes joint ownership and operation of a Mississippi River-facing barge, truck and rail terminal at Cahokia, Illinois.

Bob Rasmus, executive director of Growmark’s grain division, told Agri Investor that the partnership came about through the company’s relationships with executives at Nidera, a Dutch grain trader that owns the Cahokia facility and whose acquisition by COFCO was finalized in March.

“As we’ve seen, COFCO want to bring their supply chain into North America. They have built the capacity to export the grain, but not really the capacity on the interior: to originate the grain from the grain elevator infrastructure and also from the farms themselves,” Rasmus explained. “What this partnership allows us to do is to extend that supply chain back into the farm level, for China.”

Rasmus said, given that about one of every three rows of soybeans ultimately finds its way to China, establishing the direct upstream link was a logical step for Growmark, which is based in Bloomington, Indiana.

Under a grain merchandising agreement that is part of the partnership, a single Growmark employee will be stationed at COFCO’s St. Louis office to help originate grain and manage COFCO’s supply chain, according to Rasmus, who declined to quantify the partnership’s potential impact.

COFCO International chief executive Johnny Chi said that the deal was part of his company’s effort to establish itself as a world-class global agri-business, labeling the venture a “win-win.”

“A partnership with the second-largest agricultural supply and grain cooperative in the US links COFCO to the growers of the largest grain-growing region of the US,” he said. “CIL’s focus on global grain trading and its commitment to the US ag market will provide Growmark’s farmers with a sustainable export demand for their production.”

In helping China bolster its supply chain, Growmark is following advice offered recently by Rabobank farm inputs analyst Ruud Schers in an Agri Investor interview. Earlier this month, Schers suggested that investors look for ways to partner with Chinese firms carrying out state-led efforts designed to improve the quality of Chinese agricultural inputs, control import flows and create arbitrage opportunities.