Louis Dreyfus is following the path of other multinational companies by piling into the Chinese aquaculture sector in a bid to rescue shrinking margins elsewhere.
Rotterdam, The Netherlands-based Louis Dreyfus, a trading firm involved in shipping, agriculture, food processing, and finance, has signed up with the Donlinks Group – it also goes by the Mandarin name of Dong Ling – to produce aquaculture and bioenergy at the latter’s base in Nansha, Guangdong Province.
The 24 January announcement follows a separate deal signed in May 2019 with major Chinese feed producer Guangdong Haid Group for a “high-end” aquafeed production plant in Tianjin with capacity for 300,000 metric tons per year.
The Donlinks project will entail USD 1 billion (EUR 908.7 million) in investment, though neither Dreyfus nor Donlinks detailed how that figure breaks down in terms of share ownership or what percentage of the investment will be in aquaculture. The joint venture will also encompass grain trading and “feed protein processing” activities, according to Louis Dreyfus.
Faced with lower revenue from its bulk grain and oilseeds trading business, Louis Dreyfus has also taken a hit from the Chinese swine flu epidemic. In response, the company has targeted branded consumer goods opportunities in China. It has built a new oil crushing plant in Tianjin producing Mastergold and Chef Fu cooking oil brands sold around China, and entered into a joint venture with Chinese-owned Luckin Coffee Co. to produce a branded orange juice for distribution in Luckin stores.
Major Chinese feed producers like Haid, New Hope Liuhe, the Tongwei Group, and Tianbang (Techbank) have been shifting focus to producing feed for China’s growing ranks of crayfish and crab producers. They have also been introducing new value-added feeds for bass and grouper farmers, and for carp producers seeking to respond to consumer demand for higher-quality fish.
In addition to trading grain and oilseeds, the Donlinks Group also has a subsidiary the Sino Agri International Potash Co., which holds rights to exploit potash reserves in Laos. The group also ships coal and iron ore.
As Louis Dreyfus seeks to tap into Chinese consumers’ demand for higher-value food products, its peers in China are looking outside the country for growth. A Chinese Agriculture Ministry blueprint printed in 2019 sees a “global vision” for Chinese grain-traders to establish an international presence with “internationalized brands” and to aim for dominance in countries connected to China by its Belt and Road Initiative. But China’s huge grain market has long been dominated by large state-owned enterprises with a focus on volume and food security rather than marketing, making the pivot a difficult one to accomplish, several local and international figures working in the agricultural commodities markets in China told SeafoodSource.
Photo courtesy of Casimiro PT/Shutterstock
