Memorandum of understanding | CIGI 
signs deal with Asian agribusiness giant
An agreement between a Canadian market development institute and a Chinese food company should result in increased pulse and durum sales to that important market.
The Canadian International Grains Institute has signed a memorandum of understanding with Yihai Kerry, the Chinese arm of Wilmar International, Asia’s leading agribusiness.
The two organizations have agreed to work on a variety of projects, starting with one to incorporate Canadian durum and pulses into Yihai Kerry pasta products.
CIGI chief executive officer Earl Geddes said China has 300 million people who are as wealthy as North Americans.
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Their tastes are changing along with their bank accounts and one of the big shifts is a desire for more western style pasta.
CIGI has conducted research on how to incorporate durum and pulses into Chinese pasta to give it more of the “mouth feel” of European or North American pasta.
Introducing a small amount of Canadian crops into the Chinese diet can have a staggering impact on demand for those crops.
A case in point is the previous work that CIGI did with Pulse Canada in convincing the Chinese to substitute yellow peas for mung beans in the production of vermicelli noodles.
Chinese demand for Canadian yellow peas has risen to more than 700,000 tonnes per year from significantly less than 100,000 tonnes per year before the project. It has become the second biggest market for peas behind India.
“That’s the kind of potential if you change an ingredient,” said Geddes.
Yihai Kerry would use pulse flour to enhance the nutritional value of its pasta, while Canadian durum could be a replacement for the main ingredient: Chinese wheat.
The idea is that the durum will give the pasta that European style and feel consumers are seeking instead of the existing pasta, which is softer, smoother, stickier and more akin to Chinese noodles than European pasta.
“The potential for (durum) is absolutely huge,” said Geddes.
The market could eventually become as large as the U.S. market for pasta and durum.
Kent Erickson, chair of the Alberta Wheat Commission, said the agreement is a big lift for a crop that has had its share of disappointments.
“It’s an excellent news story for durum,” he said.
“That would be a huge market for us to exploit.”
Brenda Tjaden Lepp, chief analyst with FarmLink Marketing Solutions, said it is fantastic news for some of Canada’s most important minor crops.
“We rely on a handful of significant importers in lentils and durum, and none of them are China,” she said.
Diversifying the customer mix by adding a market such as China could help remove some of the price volatility that occasionally causes problems for those crops.
“It could potentially support a higher price threshold, but it also develops stability,” said Tjaden Lepp.
Canadian durum and pulse prices wouldn’t be as vulnerable to a huge North African durum crop or Indian lentil crop.
Geddes said the memorandum signed last week during a trade mission led by federal agriculture minister Gerry Ritz lasts for 12 months.
During that time, the two parties will build a to-do list of projects that CIGI can work on at its lab in Winnipeg and Yihai’s research lab in Shanghai.
“It’s a world class facility that makes most of the facilities that we have in Canada look pretty small,” he said.
“But facilities are one thing, know-ledge and experience are another. That’s the knowledge and experience that CIGI is sharing with Yihai Kerry that makes us an attractive partner for them.”
CIGI previously worked with Wilmar overseas in its market support role with CWB. Wilmar has annual food sales of $45 billion, $22 billion of which come from Yihai Kerry’s sales in China.
Geddes said CIGI is looking for ways to become more sustainable and independent in the post single-desk world because its funding from the federal government could run out in 2018.
Tjaden Lepp thinks the Wilmar deal takes CIGI a long way down that road.
“It’s great. Good for them. That sounds like a pretty big step towards becoming independently viable for the long-term and it sounds like the kind of work they’re perfectly suited to do,” she said.
The memorandum of understanding with Yihai Kerry is not the institute’s first food company partnership and it won’t be the last.
One of CIGI’s objectives is to gather market intelligence in all five regions of the world where Canadian crops are sold. The deal with Yihai Kerry was a perfect fit in that regard.
“This is just a really exciting piece to have settled and locked down in that China market,” said Geddes.
There is nothing in the memorandum stipulating the financial terms of the agreement. Geddes expects the business relationship will grow over time, similar to the one CIGI has with Warburtons, a bakery in the United Kingdom.
