China Plans State Agriculture Giant Overhaul

China farm
FILE PHOTO: A farmer collects corns at a field where a harvester is used to reap corn at a farm in Gaocheng, Hebei province, China, September 30, 2015. (Photo: REUTERS/Kim Kyung-Hoon/File Photo)

China plans to restructure its massive state-run food companies to resonate around global agricultural markets. According to sources familiar with the plan, the Chinese government plans to transfer the trading assets of Sinograin, a stockpile, to food giant Cofo Corp.

The sources said that the overhaul will pass through several stages which include the takeover of Cofco to the oilseed crushing capacity from Sinograin. The restructuring of the biggest companies in China will place Cofco closer to its intention of competing against the storied 'ABCD' group of international commodity powerhouses that controls the flow of agricultural products as it intends to extend its capacity to secure food supplies for the world's most populous nation.

The restructuring is part of the plan of Chinese President Xi Jinping to reform the sprawling and inefficient state-owned enterprises which account for almost half of the nation's industrial assets.

Monica Tu, an oilseed analyst from Shanghai JC Intelligence Co., said that the reshuffle plan for the two agricultural giants reflects the central government's efforts to promote 'supply-side' structural reforms. She added that it'll become part of the wave created by the reorganization of large state-owned companies.

According to the sources, the details of the plan are subject to change as the government aims to complete the restructuring by the end of next year. According to the website of Sinograin, its role is more blurred while Cofco's duty is to keep China's population fed. Singoram imports soybeans and soy oil for state reserves but they also have commercial oilseeds crushing and refining capacity that makes it the fifth-biggest player in China.

The data from China National Grain and Oils Information Center reflected that transferring Sinograin's crushing capacity would make Cofco China's biggest crusher of soybeans. Cofco owns nine units in Hong Kong and four trade on mainland Chinese stock exchanges. China Agri-Industries Holdings Ltd. and China Foods Ltd., both Cofco subsidiaries, rebounded from their earlier losses to close 1.6 percent higher in Hong Kong.

The State-owned Assets Supervision and Administration Commission, a government body that oversees the biggest government enterprises declined to give their comments on the restructure.

Ma Wenfeng, an analyst with Beijing Orient Agribusiness Consultant Ltd., said that the overhaul will expand Cofco's assets, but not necessarily profitability is given the fierce competition of the domestic soy crush industry that's been suffering excessive capacity. The 13th five-year plan proposed by the company in 2016 said that it plans to trade 30 million tons of corn by 2020, 5 million tons of sugar and process 20 million tons of soybeans.

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