Johnny Chi gives keynote address at Brazil agribusiness conference

SÃO PAULO, Brazil - Johnny Chi, Chairman of COFCO International, gave the keynote address today at the 2019 Brazilian Agribusiness Congress. 

The congress is organised by Brazil Agribusiness Association (ABAG) and Brazil Securities, Commodities, and Futures Exchange (B3).

Mr Chi told participants that he expected Brazil-China relations to become even stronger in the coming years. China is the leading buyer of Brazil’s soybean exports, which were worth US$ 31.6 billion in the year to November 2018. And Mr Chi said he expects to buy 5% more Brazilian soy by volume each year for the next five years.

“From COFCO’s point of view, the long-term relationship between our countries and our businesses looks very solid,” he said.

COFCO plans over the next years to increase its investment in new infrastructure, demonstrating the company’s intentions towards Brazil. Most of this investment will go into logistics and storage.

Looking even further into the future, Mr Chi said COFCO is keen to discuss further investment into Brazilian farms and farmers, including through financial credit for agriculture inputs and technology. COFCO intends to build its partnership with Brazil beyond soybeans.

COFCO is also interested to support Brazil’s transition to more sustainable agriculture. In particular, COFCO is looking at ways to channel long-term financing to support the expansion of soy production on degraded land. Brazil has over 25 million hectares of open land that could be used for soy production.

“We hope to offer appropriate financial incentive for sustainable production,” Mr Chi said.

Indeed, COFCO is broadly interested in new models of finance to reward environmental protection. Given the benefits of protecting our natural environments, COFCO sees this as a cost-effective investment. COFCO is also looking at ways to connect agricultural producers into global carbon markets worth as much as US$ 82 billion last year.

Last month, COFCO International announced that it would link its main bank credit facility of US$ 2.3 billion to sustainability targets.

 

Full speech delivered by Johnny Chi, Chairman of COFCO International at Congresso Brasileiro do Agronegocio in São Paulo, Brazil on 5 August 2019

Dear Minister Tereza Cristina, Dear ABAG President Marcello Brito, Ladies and Gentlemen, good morning!

Thank you so much for the warm welcome and a special thank you to President Marcello Brito for the invitation to address you all today. It’s truly a pleasure to be here.

I’m particularly delighted to see so many representatives from Brazil’s different agricultural sectors and stakeholder groups: farmers, cattle raisers, oilseeds, grains, palm oil, and sugar producers, bankers, traders, logisticians, input and machinery suppliers, students, civil society, journalists, and probably more! When I look around this room today and I see all of us here together, I am even more excited about our partnership. This partnership – between COFCO, our countries, our businesses and our people - is going from strength to strength.

And why not? Since 1974 when Brazil and China opened embassies in Beijing and Brasilia, the trade between our two countries has grown to include the export and import of soy, meat, technology, iron, crude oil, and a range of other products and services in more and more sectors. This trade now benefits more people and more businesses than ever before.

Indeed, our combined population is more than 1.6 billion people. We represent the two largest emerging economies in the eastern and western hemispheres. And our growing trade relationship is one of the world’s most important and probably the single most dynamic, especially in agriculture. I am confident that the BRICS summit in Brasilia later this year will further improve bilateral trade between our two countries.

COFCO, the company I represent, has been an important part of this partnership. We have been importing and exporting food and agricultural products on behalf of China since 1949. Today we are China’s largest grains, oilseeds and food company, with an expanded remit to deliver agricultural products not just to China but to the entire world.

Linked to this, in 2014, we bought two other traders, Nidera and Noble Agri, and we have also been investing in markets with significant opportunity for long-term growth.

Five years on, we are connecting supply and demand in more than 50 countries and becoming a truly global trader.

Last year alone, we shifted 106 million tonnes of agri commodities including grains, oilseeds, sugar, cotton, and coffee.

We have also been making good progress in getting closer to farmers. Today, we source over 40 million tonnes directly from farmers. We want this number to grow to 60 million by 2022. Furthermore, we have also made our logistics more efficient, productive, safe and sustainable.

A large portion of these things happen here in Brazil, our main sourcing market. Out of 11,000 global employees, some 7,500 are here in Brazil.

Each year, for example, our sugar mills crush 15 million tonnes of sugar cane. Employing over 5,500 people, this operation is known as one of the most efficient in Brazil.

Last year, we also exported more than 13 million tonnes of grains and oilseeds from Brazil. We have coffee and cotton businesses here too.

These businesses are growing with every passing year, a growth that has been achieved in partnership with you. Today, I would like to express my gratitude to every one of you for your support. You give us further reason to invest in Brazil, to deepen the roots of our already “deeply rooted” business.

We are confident about this expansion in Brazil, because we can see how demand is growing in China and all around the world. The global population will reach 9 billion people by 2050 and we will need to produce 70 percent more food than we already do.

In China, our growing economy is improving living standards. As people grow wealthier, they want higher protein diets. Demand for food – including meat – is rising.

All this will require the world to trade, store, process, transport, and distribute more agricultural commodities than ever before. At COFCO, we are positioning ourselves for that future, building long-term partnerships with the world’s most important agricultural regions. Our relationships with Brazil – with ABAG and with everybody in this room – are vital to our joint success.

To date, much of that success has centred on soy. Brazil is one of the world’s major producers. And COFCO is a large and enthusiastic buyer. We expect to buy 5 percent more Brazilian soy by volume each year for the next five years.

There may be bumps along the road, as we have seen with the US-China trade relationship. But from COFCO’s point of view, the long-term relationship between our countries and our businesses looks very solid. One of us is a large importer of agriculture commodities, the other is abundantly productive. We are both members of BRICS.

That is why we have been investing here in vital infrastructure, such as storage, processing, and ports. In the next years, we intend to increase further our investment in transportation logistics and new silos. These investments will depend, of course, on the continued existence of a stable and predictable investment environment.
As our partnership grows from strength to strength, then, now may be a good moment to ask ourselves: How do we build on what we have already established and deepen this relationship? How do we collaborate even better?

Growth of the world’s population requires us all to produce and trade more food. To do so, we need water, a stable climate, and healthy soils.

China has relevant experience. In 1999, the Chinese government launched the “Grain for Green” programme to convert low-yield and ecologically important arable land back to its original state.

Farmers participating in the programme receive financial support from the government. So far, more than 33 million hectares of arable land have been converted into forests and grasslands with a total investment of 72 billion US dollars. The programme is still ongoing.

We see great potential for growth in Brazilian agriculture. Meanwhile, your country is well-known for its natural beauty and resources, particularly the Amazon rainforest. These two are not contradictory.

Chinese President Xi Jinping has called for five development concepts of innovation, coordination, green, openness and sharing. In a speech at the recent Belt and Road Forum for International Cooperation, he also outlined his plans for China to ensure that its overseas investments are sustainable and that there will be high-quality growth for all. Quoting an ancient Chinese philosopher, he noted that: "plants with strong roots grow well”.

I would like to stress that sustainability needs to be viewed as not just protection of the environment. It is much more than that. Transformation to sustainable agriculture can only happen while protecting the interests of farmers and others who depend on the trade of agricultural goods. In China's “Grain for Green” project, farmers received corresponding grains and financial subsidies to ensure their livelihoods and interests were protected. Even as Brazil’s agriculture is based on environmental and social sustainability, it must remain competitive. Farmers, as a key stakeholder group, must be part of the development and rollout of any solutions. COFCO wants to travel with you on that journey.

In that spirit, my team and I are keen to discuss at this conference and in the months and years ahead: how do we do this together? How do we continue to grow sustainably and to see the next generations of farmers thrive?

I would like to share with you some of our initial ideas.

First, the global financing markets are changing. In the past two years, sustainable investments rose 34 percent to over US$ 30 trillion. Climate change and environmental conservation are now leading issues for investors around the world and investors’ confidence in green lending is on the rise.

Last month, COFCO International announced that it would link its main bank credit facility of US$ 2.3 billion to sustainability targets. These sustainability-linked loans incentivise the borrower to achieve a series of environmental, social and governance performance objectives. They allow the borrow to invest an agreed margin into sustainability improvements. This is a clear demonstration of our commitment to sustainability in our operations and supply chains.

COFCO has great interest in accessing these new models of finance and we see huge potential for others too.

For farmers here in Brazil, we see opportunity to reward farmers for environmental and social contributions throughout the agriculture value chain. For example, COFCO is establishing a programme to facilitate the long-term financing of soy production on open land. Brazil has over 25 million hectares of such land, which is suitable for farming. We hope our programme will offer appropriate financial incentive for sustainable production. We can all produce more, better and longer.

Second, we see potential in the international carbon markets. Given the value of your natural environment, you should be paid to protect it. So far, the international schemes for ecosystem service payments have not reached farmers directly. We see an opportunity to directly connect farmers into global carbon markets worth as much as US$ 82 billion last year. A scheme we are exploring would see farmers being paid for the conservation of forests or reforestation of land.

Third, we are developing a concept with industry partners such as input and insurance companies and financial institutions to offer farmers a full ecosystem of services – a one-stop-shop covering long-term financing, insurance, inputs and offtake. This will encourage more efficient and sustainable farming.

Fourth, we are actively participating in Brazil’s renewable energy and biofuels programmes through our sugar and grains & oilseeds assets. We hope to expand these projects further to support the Brazilian government’s efforts to reduce emissions and fight against climate change.

In conclusion, Brazil has become a reliable and trusted trade partner for China and COFCO. While we hope to source more from you in the coming years, we also wish to expand the scale and nature of our partnership, including by channelling more financing and investment to benefit Brazilian farms and farmers.

In a turbulent and rapidly changing world, experience teaches us that stability and long-term perspectives are precious assets. We are keen to discuss with you how best to protect our partnership long into the distant future.

Such an agenda brings new uncertainties. But it will also bring opportunity. COFCO Corporation takes sustainability and green growth seriously and Chairman Lyu published an article on this topic during the Davos World Economic Forum meeting earlier this year.

Let us enjoy the rest of this conference together, using it for a full and productive exchange of ideas, opinions, and experience. Together, we can overcome any challenge that we face, sharing the benefits between all of us here today. And our future generations too.

Thank you. Obrigado!

- ENDS -