Cofco buyout of Noble Agri suggests market in commodity trading shifting: analyst

By Jane Byrne contact

- Last updated on GMT

© istock.com/G0d4ather
© istock.com/G0d4ather

Related tags: Agriculture

The move from Chinese state-owned food and feed giant, Cofco, to acquire 100% of Noble Agri, the agriculture arm of the Noble Group, shows the market in international trading is shifting, says an analyst.

New challengers are emerging to take their place among the traditional market leaders, said Richard Ferguson, agricultural adviser to Price Waterhouse Cooper (PwC).

And he told us this trend will continue as Chinese demand for grains and oilseeds accelerates in the years ahead.

“The acquisition [finalized at the end of December] certainly adds a new dimension to COFCO's capabilities,”​ added Ferguson.

In April 2014, Cofco bought a 51% stake in Noble’s agribusiness unit for US$1.5bn.

Last month the Chinese player and Singapore based Noble signed a deal, under which Cofco will acquire the remaining 49% stake in Noble Agri for US$750m.  

February 2014 also saw Cofco acquire a 51% stake in Dutch grain trader Nidera, which has a strong procurement platform in Brazil, Argentina and Central Europe.

Dirk Jan Kennes, Rabobank global strategist farm inputs, commenting after Cofco’s initial purchase of a stake in Noble Agri, said China’s interest in acquiring and developing agricultural know-how as well as its strategy to buy-and-build a leading global agricultural trading house to secure low-value feed grain imports can help it achieve food security.

Lack of farming infrastructure

There is a shortage of arable land in the country and a lack of farming infrastructure. “China, with its shrinking land base, needs to focus on growing high value crops and livestock production. It has to look elsewhere for its corn and soy inputs,”​ said Kennes.

At the end of 2014, said Cofco, Noble Agri had sales of $14.9bn, and delivered 46 million tons of products globally.  

It engages in agricultural trading and processing, sourcing from low-cost producing regions such as South America, South Africa, East Europe, India, and Australia, to supply regions with high demand, such as Asia and Middle East.

Along with grain silos in Ukraine, it has sugar mills in Brazil and soybean crushing plants in Argentina, Paraguay and Uruguay. Cofco can also leverage Noble Agri’s network of ports and commodity terminals.

Scramble for agri-trading assets

Ferguson said that as emerging economies industrialize their meat production and hike up animal protein consumption “the recent scramble for international agri-trading assets will likely accelerate.”

He said, with the Nidera and Noble acquisitions, Cofco will be able to purchase soybeans from Brazil and other producers directly, bypassing the ‘ABCD’ quartet of grain traders: ADM, Bunge, Cargill and Louis Dreyfus.

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