June 9, 2011

China Provincial Government Investing Heavily in Western Bahia

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The governors of the state of Bahia, Brazil and the province of Chongqing, China recently signed a memorandum of understanding officially stating that a subsidiary of the Chongqing Grain Group Corporation will build a soybean crushing plant in the municipality of Barreiras in western Bahia. The crushing plant is part of a larger investment involving rail terminals, storage facilities, a private port, and even a textile mill. The total investment is expected to reach R$ 4 billion.

The Chongqing Grain Group Corporation is a state owned company from Chongqing, China. Government officials from China have decided on western Bahia for their investments because of its soybean and cotton production capacity and its relative proximity to the Brazilian coast compared to more distant states such as Mato Grosso. An additional factor that favored Bahia was the fact that the logistical capacity of the state is relatively good.

The soybean crushing facility will have the capacity to process 1.5 million tons of soybeans per year or nearly half of the total soybean production in the state. The initial investment on the part of the Chinese will be US$ 300 million to get the project started on 100 hectares of land in western Bahia.

The Chinese also indicated their intention to establish a textile mill in the municipality as well. The state of Bahia is the second leading cotton producing state in Brazil after Mato Grosso. Cotton acreage in the state surged in 2010/11 increasing 51% compared to 2009/10. Total cotton production in Bahia is expected to increase 62% compared to a year earlier.

The Chinese had originally intended to purchase large tracks of land to grow the soybeans and cotton needed to supply their crushing plant and textile mill, but new regulations in Brazil restricting the purchase of farmland by foreigners forced them to adjust their plans.