(Yicai Global) May 14 -- Xiwang Group has bought an Australian grain dealer for USD500 million with a partner as China's biggest corn processor gears up to transform itself into an international grain dealer.

Shandong province-based Xiwang and Japan's Sumitomo Group penned a memorandum of understanding to acquire Emerald Grain in March, with Xiwang taking an 80 percent stake, Chairman Wang Yong said in an interview yesterday. Emerald Grain will use Xiwang's sales network to distribute its grain imports in China.

Emerald Grain has 12,000 collection points and storage facilities for 2 million tons, and has typical annual trade of about 4 million tons of grain, mostly wheat, broomcorn and rapeseed, Wang said. Xiwang will also buy a wharf in Australia to boost Emerald Grain's trading to 10 million tons, Wang added.

The weakness in China's agriculture is not grain production nor deep processing but intermediate distribution, Wang said, adding that China needs an international grain dealer that can match its position as a major agricultural producer.

US multinationals Archer Daniels Midland, Bunge and Cargill and France's Louis Dreyfus control worldwide grain shipping and sales. Their grain growing operations are not large, but they dominate 80 percent of global trade. These four mostly control grain logistics, which is China's weakness, Wang said.

Tokyo-based Sumitomo started positioning overseas years ago and has sufficient grain and market resources, Wang said. The partners can expand grain trading very soon, relying on Sumitomo's experience, management approach and various channels, he added.

Founded in 1986, Xiwang is a large-scale industrial company with corn deep processing and special steel as its main businesses. It is one of the largest corn processors in China, with 3 million tons of corn input a year and an annual output of 1.8 million tons of glucose, which claims half of the Chinese market.

Xiwang's medicinal glucose has an 85 percent share of the Chinese market, ranking it first in Asia. Its annual output of corn oil is 300,000 tons, making up 30 percent of the domestic market.

Editor: Liao Shumin