(Bloomberg) -- China’s food giant Cofco International is positioning itself to increase soybean purchases from Brazil as trade tensions escalate between the U.S. and the Asian nation, according to a person with direct knowledge of the matter.
Cofco has strengthened its team that buys, stores and sells farmer crops, known as origination, in the South American country, recently hiring as many as 12 people to work directly with farmers in Mato Grosso, Goias, Parana and Rio Grande do Sul states, said the person, who asked not to be named because the information isn’t public. Brazil is the world’s largest soybean exporter.
While China has yet to implement its planned tariffs on imports of U.S. soybeans, the country’s traders are already canceling American shipments, according to U.S. government figures. The data reinforced comments from the chief executive officer of grain-trading behemoth Bunge Ltd., who said last week that China has essentially stopped buying U.S. supplies.
China is the world’s biggest buyer of soybeans, used in everything from cooking oil to animal feed. The nation announced the planned tariffs against U.S. shipments last month, and since then speculation has mounted that the Asian country will be become even more reliant on Brazilian crops.
Most of Cofco’s new hires are experienced, having worked for rivals such as Bunge and Louis Dreyfus Co., the person said. Cofco already has a team of about 350 people within its commercial department in Brazil, including at warehouses in the countryside.
A Cofco spokesman declined to comment on the company’s business development. On its website, Cofco says increasing its origination capabilities is key to its business strategy.
Cofco Emerges as Leading Exporter of Brazil Soy
While century-old traders like Bunge and Louis Dreyfus took decades to build a leading position in Brazil’s oilseed market, Cofco has been able to attain a similar status within just the last couple of years. Shipping line-up data signal that the Chinese company in 2017 exported more than Archer-Daniels-Midland Co., Cargill Inc. and Louis Dreyfus, -- the A, the C and the D in the so-called ABCD quartet that dominates global agricultural trade. It’s become the No. 3 exporter, trailing only Bunge , the B, and Tokyo-based Marubeni Corp.
As Cofco increases its abilities to source directly from farmers, it’s also seeking to improve logistics for shipping from Brazil. The company is consolidating port operations at two neighboring terminals it currently uses in Santos Port, the largest in Latin America, the person said. Cofco is seeking the renewal of its port concessions that are expected to expire in coming years, allowing for investment to increase export capacity, the person said.
Cofco’s expansion stands in contrast to Japanese trader Mitsui & Co., which this week said it plans to cease all operations for its grain business in Brazil by the end of December 2018 amid poor performance in the origination business.