Grain giants form JVs to optimize biz

SASAC: Business integration key task for SOEs to focus on main operations

China's largest food processor and trader COFCO and China Grain Reserves Group Ltd will integrate part of their businesses and establish two joint ventures, the nation's top State asset regulator said in a recent release this week.

Through equity cooperation, the two sides will set up a joint venture that focuses on the grain storage business, with China Grain Reserves Group taking a controlling share.

The two will also set up a joint venture that focuses on oil processing, and COFCO will have a controlling share, said the State-owned Assets Supervision and Administration Commission of the State Council.

The two enterprises signed an equity cooperation agreement in Beijing in late January. The integration is expected to help the two better focus on their main business. The challenges brought by the reform would be small and the promotion process of the joint ventures would be fast, which can help avoid some unstable factors, SASAC said.

"This year, integration of companies based on their specialized businesses is a key task for SASAC.The integration between COFCO and China Grain Reserves Group serves as the first such integration case this year," said Weng Jieming, vice-chairman of SASAC.

"The equity cooperation between the two will help further rationalize the functional positioning and management boundary of grain storage and oil processing businesses of the two companies. The cooperation will also help to build a model benchmark for further reforms, and make contributions to better guarantee the grain reserve security of the country," Weng said.

He added the two companies should effectively improve their efficiencies of resource allocation and anti-risk abilities, and provide reliable support to guarantee the stability of the grain and oil supply chain. They should also handle the relationship well between the two joint ventures and relevant asset sectors under their respective management.

When the COVID-19 broke out, the two groups transferred necessities to areas to ensure the stable supply of grain and oil products to residents.

China Grain Reserves Group, which was founded in 2000, said the current proportion of the central grain reserve at the company is 98 percent of the total. The intact rate of grain in its warehouse has remained above 95 percent for many years.

"Based on the functional positioning of the two joint ventures, the grain reserve joint venture will continue to strengthen its management of the central grain reserve, and fully implement the regulatory tasks such as policy grain collection and storage, supervision, sales and transportation," said Deng Yiwu, president of China Grain Reserves Group.

"The other oil processing joint venture will fully explore market-oriented business, strengthen the company's competitiveness, innovation, control, influence and anti-risk ability, and achieve the preservation and appreciation of State-owned assets," Deng said.

China's biggest food processor COFCO was founded in 1949, and the group's grain trade, rice processing, oil processing, deep corn processing, and sugar trade and processing business have continued to consolidate their top positions in the country by the end of 2021.

COFCO has forged a complete agriculture and food industry chain encompassing agricultural resources, brands, ports and wharves, processing equipment, storage and logistics facilities. It aims to accelerate the building of a world-class grain supplier with global competitiveness.

"For a long time, COFCO and China Grain Reserves Group have maintained good cooperation. They have given full play to the advantages of COFCO's market-oriented means and China Grain Reserves Group's policy means of grain storage. The equity cooperation this time is expected to help improve the efficiency of resource allocation and safeguard national food security," said Lyu Jun, president of COFCO.