China's reach 中国影响
Who will feed China’s pigs? And why it matters A new generation of Chinese companies like the New Hope Group and COFCO are challenging the dominance of US agribusiness as they seek to meet China’s growing demand for food
Tom Levitt
He’s been called China’s richest chicken farmer, but Liu Yonghao has come a long way from his days breeding birds in rural Sichuan province. As the billionaire founder of the New Hope Group, China’s largest producer of animal feed, Liu’s rise over the past three decades mirrors the rapid growth of the country’s agri-food corporations. His company has been at the forefront of a boom in demand for Brazilian and US soy and maize, used to feed China’s burgeoning livestock sector. It’s a boom that helped China overtake Canada as the biggest importer of US agricultural produce, with a whopping US$13 billion-worth of soy and US$1 billion of maize exported from the US to China in 2013, according to the US Department of Agriculture (USDA). That same year also saw China overtake the EU as the largest purchaser of agricultural commodities from Brazil. Over the next three and a half decades, China is expected to account for more than 40% of the global rise in demand for agri-food imports. “We’re heading towards a new era...as the majority of the world’s feed crops are destined for China’s pigs,” says Mindi Schneider, an agribusiness researcher at the International Institute of Social Studies in the Netherlands.
The rise of China’s agribusiness However, the story of China’s new agri-food giants is not just about booming imports of Brazilian and US feed crops. If it is to import significantly more food, China understand-
ably wants greater control over its production and distribution too. Liu’s New Hope Group are among a select group of companies – so-called “dragon-head enterprises” – given state support to go out and boost their global presence. The trend started back in 2008 when state-owned grain trader COFCO bought a 5% stake in US pork giant Smithfield, but really caught public attention when Smithfield was then taken over by WH Group, one of China’s biggest pork producers, for US$4.7 billion last year. In a reversal of US firms buying into China’s domestic sector – such as Tyson’s purchase of a major stake in the poultry producer Xinchang in 2009 – Chinese firms are now looking to challenge the long-standing hegemony of US agri-food giants like ADM, Cargill and Monsanto.
The battle in South America Although the Smithfield deal and the rise in pork exports to China – up 44% year-on-year at the beginning of 2014 – has garnered a lot of media attention, the battleground in China’s emerging challenge to US giants is South American commodity-exporting countries. In countries like Brazil and Paraguay, US agribusinesses have long dominated. But that’s changing fast. COFCO’s takeover of two grain traders with major interests in Brazil, Noble Group and Nidera, earlier this year has enabled China’s agri-food giants quickly to gain a foothold in the country. The US$1.5 billion deal to buy Noble, incidentally, also gave COFCO control of the fourth
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