The Korea Herald


Korea to launch grain trading firm in April

By 신현희

Published : March 11, 2011 - 21:13

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By Shin Hyon-hee
Korea’s government and companies will open a grain trading company in Chicago next month, speeding up efforts to ensure stable supply and cope with price swings, a source close to the matter told The Korea Herald.
The state-run Korea Agro-Fisheries Trade Corp. (aT) said in January it and large local firms will launch the joint corporation this year to establish a national grain procurement system.
The source confirmed that Samsung C&T, CJ CheilJedang Corp., STX Corp. and Hanjin Transportation Co., Ltd. are to take part in the consortium.
“The agricultural trading firm will be launched next month,” he said, adding that detailed plans will be announced as early as next week.
The envisioned company was initially to focus on direct trading with local farmers. But he said it will have a broad range of suppliers, including multinational agricultural giants.
“Previous news reports said the scheme would exclude the major grain companies, but it is not true. We are completely open to all potential partners, including Cargill, Inc., the Archer Daniels Midland and Bunge Ltd.,” the source said.
The government-run firm plans to invest 20 billion won ($17.8 million) the four companies together will pour in 25 billion won into the Chicago company this year.
A group of 10 or more professionals ― two from each company and other experts ― will head to the U.S. city next month and begin work to establish a distribution network, he added.
The establishment, expected in May, has been advanced as the government is stepping up efforts to stabilize surging food prices which have driven up inflation since last year.
Local food prices spiked to an all-time high in the last two months due to global crop damage from extreme weather conditions coupled with Korea’s worst outbreak of foot-and-mouth disease.
Korea is one of the world’s largest importers of agricultural commodities, bringing in about 14 million tons of corn, wheat and soybeans last year.
Through the trading house, the country aims to supply up to 30 percent of its grain needs, or 4 million tons, by 2020.
It plans to import 5 million tons of corn and soybeans each for this year and gradually raise the amount over the 10-year term.
“We aims to expand the business to the scale of major grain traders,” a Samsung C&T official said. “Our company will focus on securing suppliers and marketing, getting the most out of our international sales network.”
The project would help the nation boost its grain self-sufficiency and better cope with speculative attacks in futures markets, experts said.
“We are inevitably exposed to price volatility because of our weak distribution channels,” said Lee Cherl-ho, a Korea University food bioscience professor and chairman of the Korea Food Security Research Foundation. “Building a secure supply chain is very critical given that food security is an increasingly urgent issue.”
Korea’s endeavor would face daunting challenges in penetrating the market tightly controlled by global agro-food giants.
“They took control of the whole gamut from production to sales,” said Park Hwan-il, a research fellow at Samsung Economic Research Institute. “It is extremely difficult to make an entry into the market. (The Korean firms) will have to target untapped suppliers, though they’re not easy to find.”