(Yicai Global) Dec. 29 -- COFCO and China Grain Reserves Group, also known as Sinograin, are forming a joint venture to integrate the two state-owned grain giants’ oil seed and edible oil processing businesses, in their second major pooling of resources in the last half year.

The JV, which was incorporated in Shenzhen in September, will start operating next month, the two firms said in separate statements today. The JV is 51 percent owned by COFCO and the rest is held by Sinograin.

This follows on the heels of another JV, which is 51 percent owned by Sinograin and the remainder by COFCO, that was set up in July and started business in October to manage the country’s huge grain reserves.

COFCO is China’s largest grain enterprise focusing on the processing and trade of rice, wheat and edible oils at market prices, while Sinograin is the main body that manages central grain reserves and underpins the market price of grain by buying in bulk from farmers at the government guidance price.

But over the years, their businesses have begun to overlap and there is no longer a definite border between their non-profit and commercial operations.

The consolidation of assets through the JVs will help more clearly delineate business boundaries between the two giants, improve the allocation of resources and reduce risk, Liu Xingguo, researcher at China Enterprise Confederation, told Yicai Global.

Sinograin should focus more on public welfare projects while COFCO should focus on commercial businesses, so that they can withdraw from non-core business areas where they do not have competitive advantages, Liu said.

The JVs will help promote partnership between COFCO and Sinograin in the industrial chain, promote their market share and ensure sustained development, he added.

Editors: Tang Shihua, Kim Taylor