Aug. 26, 2019
In recent years, Chinese agriculture company Shanghai Pengxin Group has continuously conducted mergers and acquisitions to consolidate its global resources.
In July 2016, it acquired 57.57% of the Brazilian company, Fiagril, followed, in October 2017, by its acquisition of 53.99% of Belagricola. Both acquired companies are performing well, supported by their production capacity of over 7 million tons of soybean, and a future capacity of an additional 30 million tons of food grains.
Brazil is the world’s second largest agricultural producer with rich resources, which complements China’s huge agricultural market, where high-quality food product imports can be introduced.
Fiagril and Belagricola are located in two major grain production regions, Mato Grosso and Paraná, respectively, and cover similar business areas, mainly agricultural material sales, staple food grain production and trading. With nearly 30 years of industry experience, both companies have independent transportation and warehouse systems, as well as port facilities.
With nearly 80,000 square kilometres of soybean and corn planting area, the two companies have adopted the “company + farmer” business model, to offer partner farmers purchasing services for seeds, pesticides and fertilizers, as well as agricultural financing and technical consultancy services.
Pengxin’s listed company, Dakang Agriculture, currently has two platforms, which were the basis of the “Sino-Brazilian Food Grain and Agricultural Material Collaboration Platform” that can produce over 7 million tons of soybean annually.
Compared to importing soybean products, acquiring local suppliers is a proactive and creative approach, which will create a more forward-moving industry chain and diversified profit model.
According to the head of Pengxin, the two acquired companies adhere to the “asset-light” business model, which involves selling seeds and pesticides and teaching the latest techniques to major Brazilian producers, who repay the companies with harvested soybean and corn. This type of barter-trade-supply-sale model can ensure that the required quantities of farm products can be purchased in advance, which will secure a stable supply chain while improving the price negotiation capacities of local companies.
Managing agricultural businesses in Brazil will not only benefit Chinese enterprises and consumers, it will also benefit Brazilian producers. Brazil consumes large quantities of fertilizers and pesticides, but relies mostly on imports.
The implementation of the Sino-Brazilian Grain Trade Program will enable Brazil to access quality fertilizers and pesticides from China, which will benefit the two countries.