Rising incomes and a growing Chinese middle class have led to demand shifts toward more and better quality food. For instance, Chinese diets have changed to incorporate more meat, with average per capita meat consumption reaching 55 kilograms. Even so, that’s still just half of the average per capita meat consumption in America, implying there is plenty of room for Chinese demand to grow. At the same time, however, China’s arable land has been shrinking, closing in on the minimum 300 million acres that the government believes are needed to feed China’s population.
The growing appetites of Chinese consumers have led to investment opportunities in the agribusiness industry across most market segments, from soft commodities to seeds and food processing technologies. As the government pushes forward rural land reforms and moves toward modern, industrial-scale farming, China will need more technology and know-how, much of it residing in the United States. Moreover, rising concern over food safety in China has led companies to seek more vertical integration from the farm to logistics and sales. A maturing Chinese agribusiness market should present increasing opportunities for global investors across the value chain.
Hunan Dakang International Food & Agriculture is primarily engaged in the production of dairy goods, livestock, and commodities such as soybeans. The company had some success in global expansion by acquiring production facilities in New Zealand and Brazil, though other attempted acquisitions in those same markets had failed.
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The company established a subsidiary in Auckland, New Zealand to secure quality milk supplies. The subsidiary has NZD$7 million in registered capital. In 2015, the company attempted to acquire three production facilities in New Zealand. The first proposal was rejected by the New Zealand Overseas Investment Office for not meeting the criteria of bringing "substantial and identifiable” benefits to New Zealand. Consequently, Hunan Dakang rescinded proposed investments in the other two target assets. Finally, in 2016, the company acquired 16 ranches for $137 million by acquiring a Chinese company's subsidiary in New Zealand. In the same year, Dakang also took a 57.6% stake in Brazilian soy bean producer Fiagril Ltda. for $198 million.