State farm trade corporation aims to set up int'l grain company

(ATTN: UPDATES with more details in paras 5-7, ADDS with new information, comments
from para 9)
SEOUL, Feb. 11 (Yonhap) -- South Korea's state-run agriculture trading
corporation said Thursday that it aims to set up an international grain
purchasing and distribution company that can better insulate the country from
fallout from global price hikes.
The plan calls for the new grain handling company to set up an international
distribution network in the next 10 years, officials at the Korea Agro-Fisheries
Trade Corp. said. This it said would allow it to purchase products directly from
farmers in foreign countries and distribute wheat, corn and beans around the
world.
The company can also invest directly in foreign farms or acquire control stakes
in agricultural operations, the officials said.
At present, South Korea depends entirely on multinational companies such as
Cargill, ADM, Louis Dreyfus LCD and Bunge to get its grain. A recent report by
the Korea Rural Economic Institute claimed the country often paid more for grain
purchased through such companies than it bought products on the open market.
"If the new company functions properly, it could handle roughly 20 percent of
grain imported by the country by 2015 or about 4 million tons," said Hur
Hoon-moon, head of the corporation's planning and management office. The country
with self sufficiency in grain of just 26 percent of demand, imports on average 14
million tons of wheat, beans and corn per year. South Korea is the fifth largest
importer of grain in the world.
"Such a company can help the country cope with sudden fluctuations in global
prices that are sometimes triggered by speculation and the near monopoly
exercised by a handful of grain trading companies," he said.
The official said the state-run plans to set up the new company capitalized at an
initial 200 billion won (US$172 million), which would purchase grain elevators or
silos near areas of production and at harbors and engage in trading activities at
the Chicago Board Of Trade (CBOT).
The CBOT, the world's leading grain futures market, handles on average 21 percent
of all the 2.2 billion tons of grain produced in the world every year.
The grain purchased can be shipped to South Korea, which has to import most of
its food from abroad, or sold to overseas buyers and food processing companies.
Hur said that the new company's operations will be centered in areas overlooked
by multinational grain companies.
The director general said that the state-run company is in talks with one or two
small-sized grain elevator companies in the United States for possible takeovers
of them.
"In addition to trying to gain a foothold in the U.S. market, investments could
take place in Southeast Asia, Central Asia and South America," he said.
He hinted that participation in the Ukraine wheat and bean markets may be
possible, with similar efforts to be made in such countries as Kazakhstan,
Indonesia and Argentina. The company's efforts to have access to the
international grain market could include the purchase of a local grain company in
Brazil.
"These areas usually have underdeveloped infrastructure that can pose challenges,
but they have growth potential and have low production costs," he said.
The farm trade promotor, meanwhile, said that it will strive to increase exports
of locally produced farm goods and foods from US$4.8 billion in 2009 to $6.4
billion this year.
It said compared to the past, emphasis will be made in supplying locally produced
goods to food vendors and franchises, and large distributors.
The public corporation said that it plans to help companies take part in various
foreign food fairs and invite overseas buyers to come to South Korea that could
lead to export deals.
yonngong@yna.co.kr
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