Archer Daniels Midland (ADM) has agreed to form a soybean joint venture in Egypt with fellow U.S. agricultural merchant Cargill to take advantage of strong demand for edible oil and livestock feed.
The agreement will give ADM joint ownership of Cargill’s soy crushing facility in Borg Al-Arab on the Mediterranean coast, the companies said in a statement on Monday.
A source close to the deal had earlier said that the firms would be establishing an oilseed joint venture in Egypt.
Cargill is already in the process of expanding daily crushing capacity at the facility from 3,000 tonnes to 6,000 tonnes, an investment it had estimated at $100 million when it announced the expansion in 2015.
“Egypt is an important market where demand for high-quality soybean meal and oil is outpacing the rest of the world,” John Grossmann, ADM’s president, EMEA oilseeds crush, said in the statement.
The financial terms of the joint venture, which is expected to begin operations in mid-2018 following a regulatory review, were not disclosed.
The joint venture will be managed as a standalone entity, with equal ownership between ADM and Cargill, the groups said.
In addition to the production site, the partnership will also cover related commercial and support activities, including a Switzerland-based merchandising operation for supplying soybeans to the crush plant, the companies said.
The venture will not include Cargill’s grain business and port terminal in Dekheila, or the ADM-Medsofts joint venture at the port of Alexandria, they said.
A fast-growing population has fueled food demand in Egypt, making the Arab state reliant on imports of crops like wheat, corn and soybeans for human staples like bread and for livestock feed.
The partnership between ADM and Cargill in Egypt comes as global agricultural merchants are reviewing operations after several years of abundant supply and low volatility squeezed profits on buying, selling and shipping crops.