CCM: COFCO: excessive administrative interference reduces gross profit margin of grain, oil and sugar businesses 10-17-2016

On 2 June, 2015, the disclosure of investor information of COFCO Limited (COFCO) reveals that the gross profit margin of COFCO's grain, oil and sugar businesses is further decreasing. In 2012, 2013, 2014 and Jan.-March 2015, COFCO's gross profit margin from its main business segments, grain, oil, sugar and other agricultural produces concerning the trade, processing and related businesses was 6.96%, 6.56%, 3.89% and 3.11% respectively. The falling gross profit margin leads to serious loss of the company. For this, COFCO explained that since 2009, China continuously increases the purchase price of grain, in order to stabilize the production and enhance farmers' initiative in planting. This has increased the operating costs of the company. In addition, for maintaining the people's livelihood, the government also controls the sale price of finished grain products. Therefore, China's grain industry is greatly affected by the national administrative interference. Also, in 2014, the cost price of China's sugar industry was lower than the market price, resulting in over USD1.63 billion (RMB10 billion) loss in the whole industry. COFCO also suffered.


COFCO, established in 1952, is China's largest grain and oil import & export company and food manufacturer. Its businesses involve corn deep-processing, grain & oil trading and sugar. In recent years, COFCO's grain, oil and sugar businesses have suffered from loss, so the company hopes to improve its market competitiveness and profit level by the listing of its assets of grain, oil and sugar, which draws wide attention from media.  


About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.

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