Mitsui May Boost Farm Investment Overseas on Demand

Bloomberg | December 16, 2008

By Aya Takada and Ichiro Suzuki

Dec. 17 2008 (Bloomberg) -- Mitsui & Co., Japan's second-largest trading company, may increase investment in farming overseas to secure food supplies as competition from China, the biggest grain consumer, intensifies.

The company is seeking new targets after taking a 39.35 percent stake in Multigrain AG, which produces soybeans in Brazil, the world's second-largest grower, Keiichi Tsukahara, general manager at Mitsui's oilseeds department, said in an interview in Tokyo. He declined to elaborate.

Food costs may jump next year if farmers reduce planting in response to slumping prices and a credit crunch hurts lending to growers, according to the United Nations Food and Agriculture Organization. Japan, the world's biggest corn importer, joins South Korea and Saudi Arabia in boosting efforts to invest in foreign food production.

``Some people say the commodity boom is over as prices tumble from the peak, but we believe food supply will become increasingly tight in the medium to long term,'' Tsukahara said.

China, the fastest-growing major economy, has overtaken Japan as the biggest soybean importer. Rising incomes have increased consumption of food, boosting demand for cooking oil and livestock feed. The rise of China has weakened the bargaining power of Japan, Tsukahara said.

``To secure supplies that meet our quality requirements, investment in farmland is one of the options,'' Tsukahara said yesterday. Mitsui is the country's largest oilseeds importer.

Korea, Saudi Arabia

Korea's Daewoo Logistics Corp. agreed to lease 1.3 million hectares (3.2 million acres) in Madagascar for 99 years to produce food and biofuel, the company said last month. Saudi Arabia will start a 3 billion riyal ($800 million) company to invest in agriculture projects outside the kingdom, Arab News reported, citing Fahd Balghunaim, the Minister of Agriculture.

Mitsui paid $123.75 million to boost its stake in Zug, Switzerland-based Multigrain, the company said Oct. 7. It acquired a 25 percent interest last year.

Japanese soybean imports are forecast to drop 1.7 percent to 4.09 million metric tons this year from last year, according to the Ministry of Agriculture, Forestry and Fisheries. Mitsui takes about 20 percent of the total, Tsukahara said. Chinese imports are estimated at 36 million tons in the year to Sept. 30, 2009, according to a U.S. Agriculture Department report.

Japan Demand

Soybean demand in Japan is forecast at 4.24 million tons this year, including 1.04 million for food processing and 3.07 million for crushing to produce oil and livestock meal, the ministry said last month.

Buyers in the country paid record premiums for non- genetically modified soybeans under contracts this year with farmers in the U.S., the world's largest producer, according to Nobuyuki Chino, president of Tokyo-based Unipac Grain Ltd.

U.S. growers asked for higher premiums as they planted fewer acres to non-GMO crops that are more expensive to produce and lower-yielding than modified varieties, Chino said. Japanese makers of soy sauce and other traditional foods do not use GM crops because of consumer concerns that they are not safe.

Mitsui is planting non-GM soybeans on part of its 120,000 hectares of Brazilian farmland. The company produced 100,000 tons of soybeans, 20,000 tons of corn and 20,000 tons of cotton on the land this year and plans to increase total production to 800,000 tons in 2014.

Global Sales

The company sells 1.5 million tons of soybeans and 1 million tons of rapeseed a year globally, the largest among Japanese trading companies, Tsukahara said. It aims to boost sales by 50 percent, he said, without giving a time frame.

Demand for Brazilian soybeans is expected to grow next year after protein levels in this year's U.S. crop declined, making the supplies less attractive to feed makers, Tsukahara said. Soybean meal is the largest protein source in animal feed.

Production of Brazilian soybeans is expected to fall next year as the global recession curbs loan availability for farmers, leading to less planting, Tsukahara said. Reduced use of fertilizers also threatens yields, he added.