How does COFCO's overseas investment flow reveal how to play the next "Golden Decade"?

The future investment strategy of COFCO in the BRICS countries is clear.

On September 7, the Economic Observer reported from COFCO that in the future, COFCO will continue to maintain and expand trade and investment activities in the BRICS countries, and will also trade, process and recycle agricultural products with outstanding enterprises in the BRICS countries. We have cooperated extensively in various fields to jointly develop overseas markets.

Zhao Shuanglian, Party Secretary and Chairman of COFCO Group, told the Economic Observer: "Of course, investing overseas is only the first step of internationalization. What is more important is to finally realize the integration of domestic and international business and corporate culture."

According to the latest statistics, in 2016, COFCO's agricultural and food business in the BRICS countries was 13.54 million tons, with an amount of 3.4 billion US dollars. In 2017, the total operating volume is expected to exceed 15 million tons, and the amount is expected to exceed 3.7 billion US dollars.

At present, COFCO has invested US$2.1 billion in the BRICS countries, accounting for nearly half of the Group's overseas investment. The assets cover all aspects of the value chain, such as silos, transfer stations, crushing plants, refineries, and export terminals. Nearly 9,000 local employees are associated with these investments.

Zhao Shuanglian’s “integration” includes the integration of global supply chains through the effective docking of major agricultural production areas and the Chinese market.

In fact, since the end of the 1980s, COFCO has started its industrialization process, investing in mergers and acquisitions, mergers and acquisitions. After more than 30 years of development, COFCO’s layout of domestic grain, oil and food processing trade has been basically completed, with the increasing dependence on international raw materials. To expand overseas distribution and extend the supply chain has become an inevitable choice for enterprise development.

However, the risk to be noted is that in the future, COFCO's overseas business development and international operations will face the challenges of geopolitical risks and shortage of international talent.

path

Trade and investment, this is the "double-horse carriage" of COFCO's international cooperation in the agricultural sector in the BRICS.

Zhao Shuanglian said that the reason why the trade and investment are operating in the BRICS countries is because agriculture is an important economic pillar and "stabilizer" in the BRICS countries. The BRICS countries have strong complementarity in agriculture. Sex, the space for cooperation is huge.

For example, among the BRICS countries, Brazil and Russia are important producers and exporters of important agricultural products in the world. China is the world's largest population and the world's largest consumer of food and food. The Indian market has an important position in the international vegetable oil market.

From the data point of view, COFCO has been maintaining close trade relations with the BRICS countries. In 2016, COFCO imported a total of 7.5 million tons of agricultural products and foodstuffs from the BRICS countries, amounting to approximately US$3.1 billion, accounting for 33% of the total imports of COFCO. Among them, COFCO Group imported 7.49 million tons of Brazilian soybeans, meat products and sugar; imported about 6,000 tons of Russian oils and fats; imported 2,100 tons of Indian cotton, spices and feed; and a small amount of steamed rice exports to South Africa.

In recent years, COFCO has also cooperated with Brazil, Russia, India and South Africa in the import of textiles, cotton linters, wool and other textiles and garments. From 2016 to the present, imports of goods from Brazil amounted to approximately US$50 million, imports from Russia amounted to approximately US$16 million, and imports from India amounted to approximately US$10 million. At the same time, COFCO exports more than 10 million US dollars of garments and fabrics to Russia every year.

In addition to trade, and to observe the level of industrial investment, COFCO also has a layout in the BRICS countries.

The Economic Observer reported from COFCO that the group has invested about US$2 billion in the BRICS countries through the acquisition of Noble Agriculture and Nidera (Nidera), accounting for 48% of total overseas investment.

According to internal statistics of COFCO, the group currently invests more than US$1.9 billion in Brazil to develop various businesses such as oilseeds, grains, sugar, coffee, fertilizers and seeds, including its own grain source control, grain processing and transit. The logistics facility has a soybean crushing plant, four sugar mills, a transfer station, two terminals and 19 silos. In 2017, the grain oilseeds in Brazil will exceed 10 million tons, the processing capacity will be 1.32 million tons/year, the storage capacity will be 1.81 million tons, the sugar cane crushing capacity will reach 15.5 million tons, and the self-owned port will have a transfer capacity of 3 million tons. At the same time, COFCO has the largest soybean crushing plant in South Africa and a refinery in India.

The Economic Observer was also informed that a few days ago, in order to promote the implementation of the “One Belt, One Road” strategy of COFCO in the BRICS countries, the Far East Company was registered in Russia in 2017 as the platform for the procurement of grain and oil products of COFCO in Russia.

In the next step, the above-mentioned Far East Company will speed up the import of non-transfer oil in Russia and cooperate with local Russian companies to try to introduce Russian high-end mineral water into China.

In Zhao Shuanglian's view, China and other BRICS countries have strong complementarities in agriculture. China is the world's largest population and the world's largest consumer of food and food. Limited by its own resource endowments, China must import agricultural products from the international market to meet domestic consumption, such as oils and fats, sugar, meat and dairy products. Brazil and Russia are major global producers and exporters of agricultural products, highly complementary to China's import demand.

Instance

Driven by the path of trade and investment, what is the actual situation of COFCO's overseas distribution in different BRICS countries?

In Brazil, for example, the country is one of the world's leading exporters of agricultural products, the world's largest sugar producer and exporter, the second largest soybean producer and exporter, and the third largest corn producer. Corn exports rank among the top five in the world. It is also the world's largest exporter of beef and chicken.

The Economic Observer reported from COFCO that COFCO provided more than 10 million tons of soybeans to the Chinese market every year from Brazil, accounting for more than a quarter of China's total imports from Brazil. COFCO's sugar processing crush in Brazil is converted into sugar. 20% of total production in China. In the future, COFCO will further expand the scale of the sugar industry.

According to internal statistics of COFCO, China imported nearly 2 million tons of sugar from Brazil in 2016, accounting for 65% of total imported sugar. Imported meat from Brazil was 740,000 tons, accounting for 17% of total imported meat.

With the increase in protein demand brought about by China's consumption upgrade, Brazil is also China's second largest source of agricultural products after the United States. Up to now, COFCO has invested more than US$1.9 billion in Brazil to carry out various businesses such as oilseeds, grains, sugar, coffee, fertilizers and seeds.

The Economic Observer was informed that in Brazil, COFCO and farmers are based on a new partnership brought about by intensive modernization. COFCO has set up factories in the field and provided farmers with agricultural services for fertilizers, pesticides, finance, etc., forming a one-to-one business relationship. Through the subordinate grain depots, oil processing plants and terminals, it is possible to directly receive and store farmers' grain and grain for processing and export.

The agricultural service capacity starting from technology and R&D, the control of grain sources, the layout of key logistics nodes, the processing efficiency of maximizing utilization, and the risk control system based on global information sharing together constitute the agricultural product value chain of COFCO in Brazil. At the other end of the value chain is COFCO's terminal production and distribution system in areas with rapid growth in demand such as Asia. In the end, Brazil's most competitive agricultural products will be transported to high-demand Asia and other regions at the lowest cost through the most efficient organization and the most convenient logistics.

In addition to Brazil, COFCO has a long history of agricultural cooperation with Russia, including oil and fat cooperation.

At present, COFCO is engaged in domestic trade and export of grain, oilseeds and oilseeds through cooperation with local farmers and distributors. It is one of the top ten grain producers in Russia and its trade volume is expected to exceed 800,000 tons in 2017.

In 2017, COFCO implemented the first batch of Russian wheat importation tasks that were shipped to China via land-based ports and signed a total of 2,000 tons of Russian spring wheat procurement contracts.

Zhao Shuanglian said that the BRICS countries are an important partner of COFCO to promote the "International Grain Food Business Development Strategy", and it is also a key force for achieving international agricultural co-prosperity. BRICS cooperation is both a "reward for profit" and a trend for justice. ."

In South Africa and India, COFCO's “International Grain Producer Development Strategy” is also reflected. Currently, the group is an important agricultural trade processor in South Africa and India.

Among them, COFCO is the largest international grain trader in processing trade in South Africa. The agricultural planting, trade and crushing scales are in the first place. It has the largest soybean crushing plant in South Africa. The Group estimates that the trade volume in 2017 will exceed 2 million tons. 67% of the edible oil in the Indian market comes from imports. COFCO is engaged in the processing and trading of edible oil in India. The Group estimates that the processing and trade volume in 2017 is expected to exceed 600,000 tons.

challenge

Behind the results, challenges and advantages coexist.

Zhao Shuanglian said that the overseas business development and international operations of COFCO Group are mainly faced with the challenges of geopolitical risks and shortage of international talents.

For example, some countries with abundant agricultural resources are full of political instability and instability factors, such as political change, political turmoil, wars or political conflicts between countries, which will bring about major uncertainties in agricultural product processing and trade in the region. Sex, the company is not working properly. "People" is the core element of a trade-oriented enterprise. With the continuous expansion of overseas business, the shortage of international talents will be highlighted. In particular, the lack of high-level talents is both proficient in business, familiar with foreign policies and regulations, and The high-end compound talents with practical operational experience are obviously insufficient.

In addition, different countries have different risks and challenges in infrastructure construction and financing. They need to extensively understand the basic conditions of local culture and investment environment, and assess and predict and prevent risks in a reasonable and objective manner. In Brazil, for example, Brazil, as the world's most important agricultural product producing area, attracts many global companies to invest in this, but there are also some investment risks.

However, coexisting with the risks, COFCO's advantages in deploying overseas business in the BRICS countries are also obvious.

Zhao Shuanglian believes that the development potential and advantages of the BRICS in the agricultural sector are mainly reflected in the “rich water and soil resources”. For example, Brazil and Russia are vast, rich in land resources and water resources, and have the basic elements of agricultural development. According to the statistics of the Food and Agriculture Organization of the United Nations (FAO), Brazil's agricultural land area is 283 million hectares, accounting for 33% of the country's land area; Russia's agricultural land area is 218 million hectares, accounting for 12.7% of the country's land area. The two countries are currently in the development stage of “expanding the agricultural frontiers”, and the area of ​​cultivated land is still expanding.

Second, predictable productivity gains. The Brazilian government encourages mechanized production and technological innovation. FAO predicts that Brazil's total factor productivity can reach 4%, indicating that Brazil's production efficiency will be further enhanced through the development of agricultural technology. Russian agriculture is still in the development stage, and the yield per unit of crops is low. The yield per hectare of wheat, corn and soybean is 2.69 tons, 5.51 tons and 1.48 tons, respectively, which is 21%, 5% and 49% lower than the world average. In the future, with the increase in investment in the agricultural sector, production efficiency will be effectively improved.

Zhao Shuanglian believes that Russia and the Black Sea region have vast black soils suitable for the growth of crops such as soybeans, corn and wheat. In addition, Russia has strict regulations on agricultural production and agricultural standards for implementing agricultural standards. It is foreseeable that Russia and the Black Sea region will become the world's more important and high-yield non-GM crop production areas.

Prospect

With the deep expansion of overseas business, in the future, the strategy of “Internationalized Grain Producer Development Strategy”, how will COFCO plan to go?

The Economic Observer reported from the “13th Five-Year Plan” of COFCO that the plan clearly stated that it will build “a unique global distribution, full industrial chain, and the largest market and development potential of agriculture, grain and oil products in the next five years. Enterprises have become the main body of national food security strategy and food safety strategy.

The COFCO Group has finalized the above-mentioned development strategy: First, the trend of China's agricultural product supply and demand pattern. Since the new century, China has gradually changed from an agricultural exporting country to an importing country. In 2011, it became the world's largest importer. Although some domestic agricultural products have experienced short-term and structural oversupply in recent years, imports are a long-term trend and need to rely on two. Market and two resources to ensure food security.

The second is national policy support. After the 18th National Congress of the Communist Party of China, the central government clearly defined the food security strategy of “mainly based on me, ensuring production capacity, moderate import, and scientific and technological support”, and proposed to use two markets and two resources to build an international food business and “for the COFCO”. Going out has created a good policy environment.

The third is the development of enterprises. Since the end of the 1980s, COFCO has started its industrialization process, investing in mergers and acquisitions, mergers and acquisitions. After more than 30 years of development, COFCO’s layout of domestic grain, oil and food processing trade has been basically completed. With the increasing dependence on international raw materials, the overseas layout has been expanded. Extending the supply chain has become an inevitable choice for enterprise development.

Since 2014, COFCO has successively acquired two international agricultural grain trading enterprises, Noble Agriculture and Nidela, and initially established a global supply chain network to adjust industrial structure and optimize resources for global food and food. The ability to be safe has increased significantly.

Zhao Shuanglian said: "Of course, investing overseas is only the first step of internationalization. What is more important is to finally realize the integration of domestic and foreign business and corporate culture."

He said that COFCO will achieve effective management of overseas enterprises with a global governance structure and an international management system. On the one hand, in order to serve the needs of the Chinese market as a priority for overseas business, the integration of the global supply chain will be realized through the effective docking of the major agricultural production areas and the Chinese market. On the other hand, COFCO insists on localized operations. In order to improve management capabilities and reduce operational risks, COFCO has led the rebuilding of management teams of overseas companies and adjusted them according to the development of overseas companies and the overseas development strategy of COFCO. A group of professional managers with rich management and management were dispatched to participate in the operation and management of overseas companies. Through regular training and cultural integration of overseas managers and employees, COFCO's corporate culture was gradually introduced into the global business.

In fact, COFCO's total assets are already at the top of the international grain producers, but other economic indicators still have a gap compared with the international four major grain producers. Then, in competition with the international four major grain producers (ADM, American Bunge, Cargill, France Louis Dreyfus), how will COFCO improve its competitiveness?

The latest plan of COFCO Group is to enhance its competitiveness by focusing on core core business, professional development, integrated operation, deepening the domestic market, strengthening refined management, and strictly controlling market risks. As China's population growth, economic development, urbanization pace and consumption structure increase, the gap between supply and demand of agricultural products and food will continue to expand in the future. It is estimated that by 2025, imported agricultural products will account for 20% of domestic consumption. This is also an opportunity for the development of COFCO.

In the next step, COFCO will be based in the domestic market, focusing on core businesses such as grain, oil, sugar and cotton. It requires that the market share of the core business of grain, oil, sugar and cotton accounts for more than 15%, and 80% of the Group's assets are concentrated in the core industry. The assets and management functions of different listed companies, which were originally dispersed in different sectors, were designed according to 18 specialized companies, and the integration of human property, production, sales, management and property rights was implemented.

At the same time, COFCO will vigorously promote the integration of capital and business, and will seek the short-term and replenish the gaps with the world-class grain traders, through fine management, reduce costs and increase efficiency, strictly control risks, and strive to improve their own management level and make themselves The asset size matches the economic benefits.

In the future, COFCO will continue to lay out globally, optimize global warehousing and logistics facilities, and continue to improve its ability to control first-hand grain sources. At the same time, we will focus on cultivating global resource integration capabilities and international industry competition, effectively integrating global talent, technology, management, capital and other production factors and natural resources, and establishing and improving market integration, capital integration, management integration, and cultural integration. The operation mode realizes the integrated operation of domestic and overseas business and strives to improve the international operation capability.