Cargill said Wednesday it is selling its poultry business in China to DCP Capital, a Beijing-based private equity firm.
The Minnetonka-based food and ag giant said China remains one of its key markets, but the sale of its chicken business there — once a growth area for Cargill — will help "support the continuity of existing operations in the country."
China is the world's second-largest poultry producer behind only the United States, churning out about 19 million metric tons of chicken meat last year.
The deal requires regulatory approval and includes farms and manufacturing sites largely near Chuzhou in the Anhui province in eastern China.
Cargill said it'll operate Cargill Protein China until the transaction closes later this year. The new venture will take on Cargill Protein China's 3,000 employees and facilities.
The company said the decision to sell emerged after "an extensive review of its portfolio and alternatives for the future of its poultry business in China."
"China remains an important market for Cargill. The company has proudly operated in the region for over 50 years and will continue to evolve to best serve the growing domestic food and agricultural markets throughout Asia," Cargill said in a statement.
The company did not disclose a sale price.
In 2011, Cargill began its China poultry venture in Chozhou. It built a massive integrated chicken plant — that does everything from raising chicks to processing finished meat products — which was completed in 2019. The $48.8 million plant can process 65 million birds a year.
Poultry producers around the world, including in China, have faced slimming profit margins over the last two years as the Russian invasion of Ukraine drove up feed prices. China also faced weakened demand for poultry during the COVID-19 pandemic, according to Juhui Huang, an agribusiness consultant at Beijing Means Consulting Co.
"Local companies in China are generally better in managing their costs and more flexible in sales strategies like payment terms, which makes them more competitive in such a difficult environment," he said.
Despite the pressures, China's largest poultry players have continued to expand, far outpacing smaller operations such as Cargill's. Wellhope Foods, one of the largest domestic firms, slaughtered 700 million chickens last year and has a goal of 1.5 billion birds by 2029.
Reuters contributed to this report.