Japanese Traders Push Grain Supply Chain Models Elsewhere in Asia
Nikkei English News (Japan) -- TOKYO, JAPAN -- November 7, 2011 -- Making bulk purchases is vital to winning deals in the international race to buy grain. To ensure that they can sell all of that grain once they acquire it, Japanese general trading companies have been building supply networks that include livestock farms, meat processors and retailers.Falling domestic demand is making it hard for the traders to quickly sell grain solely for Japanese consumption, so they are taking these supply models to China and other Asian markets in partnership with local and domestic firms.
A typical example of this is a partnership formed in June between Mitsubishi Corp. (8058) and two of its group companies -- Itoham Foods Inc. (2284) and meat processor Yonekyu Corp. (2290) -- and a Chinese meat business operated by Cofco Group, China's No. 1 food company.
Mitsubishi aims to use the partnership to build a new supply chain for feed grain it buys overseas. Specifically, Japan's largest trader will supply grain to Chinese firms; the grain will be used to raise such livestock as pigs and chickens; and the meat produced in China will be sold to Japanese meat processors.
Head start
Marubeni Corp. (8002) in August tied up with two Chinese firms to create a similar supply chain. Under the deal, Marubeni will supply soybeans it purchases to Sinograin Oils Corp., which operates under the wing of Sinograin Co., a state-backed corporation managing the country's grain reserves.
The Chinese partner will produce oil from the soybeans, and the soybean meal, a by-product of the oil-production process, will go to the other partner, Shandong Liuhe Group Co., China's largest feed company. To establish this supply chain, the three partners plan to construct about 15 feed factories on a site adjacent to Sinograin's oil mills by 2015.
None of the world's multinational grain giants have ever built such a supply chain with a Chinese state-affiliated corporation, according to Marubeni Managing Executive Officer Daisuke Okada. "We've managed to take that step ahead of them," he said.
End users
Itochu Corp. (8001), meanwhile will ship farm produce it procures worldwide to Shikishima Baking Co., a Japanese breadmaker and Itochu's partner in Chinese operations, and a Chinese pig-farming business in Shandong Province. The Japanese trader plans to sell its partners' products through the convenience stores of its affiliate, FamilyMart Co. (8028), which is aggressively pushing deeper into the Chinese consumer market.
"Securing end-consumers will help expand our entire food business, including procurement (of materials)," said Yoshihisa Aoki, senior managing executive officer of Itochu.
Another trader, Sojitz Corp. (2768), is looking to develop a supply chain in Southeast Asian markets. It recently joined hands with feed producer Kyodo Shiryo Co. (2052) to launch a joint feed factory in Vietnam in 2013.
Sojitz aims to locally process the grain it purchases into feed, and then sell the feed to Vietnamese livestock farmers, and also sell the pigs raised by them.
"We are confident that high-quality feed produced by Japanese firms will sell well," said Hirofumi Takeda, a Sojitz executive in charge of food resources operations.
-- Translated from an article by Nikkei staff writer Haruhiko Kudo and Tamaki Kyozuka
(The Nikkei Nov. 5 morning edition)
(c) 2011 Nihon Keizai Shimbun America, Inc.
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