Norway-based Yara sees fertile market in China

China's magnetic pull on foreign companies is undeniable, even when the financial benefits of doing business in the country are relatively modest.

Take Yara International ASA. The Norway-based company is the world's largest publicly traded producer of nitrogen fertilizer. Although it has been in China for 100 years, it generates just $750 million of its $15 billion in annual revenue from the nation.

Nonetheless, "China is an important market to us," said President and Chief Executive Officer Jorgen Ole Haslestad.

Asia accounts for 10 percent of Yara's annual sales. China, which receives about 400,000 metric tons of the company's fertilizer annually, accounts for just under half that amount.

But Haslestad said Yara is like other agribusiness companies drawn to the reliable revenue stream that China represents.

With the challenge of feeding one-fifth of the world's population amid a shrinking area of arable land, China is on pace to spend more than $30 billion on farm and agricultural assets this year, up from $5 billion five years ago, according to Mitch Kasper, managing principal with Midwest AG Investors, which invests in agriculture-based assets.

That estimate includes China's $4.7 billion acquisition last month of United States-based Smithfield Foods Inc, the world's biggest hog farmer and pork processor.

Although many small, local fertilizer makers sell products to China's farmers, some of them "have had a bad experience using locally produced products", Haslestad told China Daily in an interview. "I'm not saying that local produced products are bad, by any means, but sometimes it is not at the same high quality as we are guaranteeing."

While farmers in China might use local products for cash crops such as fruit and vegetables, where the profit margins are higher, they will use Yara's products for higher-end crops because "they know they get the right quality and they know they can rely on us", Haslestad said. "They can guarantee they can deliver the products for the period when they need it."

He has a front-row seat on China's agricultural challenges, particularly over-fertilizing farmland. "The challenge in China is you have millions of farmers farming on very small pieces of land, and they would like to optimize that land to the largest extent," Haslestad said.