Companies

Agricultural group seeks more overseas expansion

By Duan Yan and Bao Chang (China Daily)
Updated: 2011-03-14 15:42

Company finds farming methods are different in various countries

BEIJING - Heilongjiang Beidahuang Nongken Group, the country's largest agricultural company, plans to expand its overseas business.

The group's chairman Sui Fengfu said it plans to acquire 200,000 hectares of farmland in Russia, the Philippines, Brazil, Argentina, Australia, Zimbabwe and Venezuela in 2011.

The State-owned group had invested more than 250 million yuan ($38 million) in overseas projects between 2005 and 2010. While the expansion plan is global, practices differ in different places, Sui, who is also a deputy to the National People's Congress, said on the sidelines of the ongoing session.

"In Venezuela and Zimbabwe, the group mainly provides machinery and laborers, and takes about 20 percent of the harvest in return," Sui explained.

"In Australia, it is mainly through the acquisition of local farmland. In Brazil and Argentina, the business model involves renting land."

The group is continuing its operation in Russia, where it rents land for soybean cultivation, and has expanded into Mongolia.

The group will also work on the development of new varieties of such crops as corn and rice to boost output in the Philippines.

"We first worked with local universities to develop new varieties for planting trials. Then we set up companies to deal with the high-yield seeds," Sui said.

Related readings:  Govt to invest $15b in farmland  Farmers' issue main concern  China to invest 100b yuan for food security  Financial leasers thrive in agriculture

Wang Yunkun, deputy director of the Agriculture and Rural Affairs Committee of the National People's Congress, said Chinese companies should seek farmland abroad because China has technology, a large workforce and capital but lacks arable land.

"Countries in South America, for example, have arable land and need our technology and investment, and they welcome our companies. It's a win-win solution," Wang said.

Mei Xinyu, a researcher with an international trade and economic cooperation research institution affiliated with the Ministry of Commerce, said, "Chinese agricultural companies can bring advanced farming techniques to foreign markets and alleviate the international food supply crisis. Chinese enterprises' overseas expansion can reduce global grain prices by increasing output."

But record-high international food prices have created roadblocks for Chinese companies' overseas investments in the agricultural sector.

Some countries, such as Argentina, restrict agricultural exports. Brazil last year adopted rules preventing companies that are more than 50 percent foreign-owned from holding more than about 5,000 hectares of farmland.

And international shipping costs drive agricultural prices even higher.

Wang warned that Chinese companies must evaluate whether expanding abroad will be profitable, and factor in transport, labor and land quality.

Mike Bastin, a visiting professor at the China Agricultural University, said, "Chinese agribusiness' aggressive overseas expansion may well continue for some time in order to achieve stability and sufficiency in the agricultural supply to the Chinese market."

"Chinese agribusinesses also need to build agricultural brands and not just produce products," Bastin said.

"Branded agricultural products should lead to greater security in the event of supplier price rises."