Most-Asked Question at World Pork Expo: What About the Smithfield Sale?

It’s probably not surprising that the question that came up most often in pork producer conversations at World Pork Expo involved speculation about the implications of the sale of Smithfield Foods to Henan Shuanghui of China. In case you missed it, Steve Meyer, Paragon Economics, Inc., addressed this very question in the June 3 issue of the National Hog Farmer Weekly Preview newsletter. As Meyer points out, the sale of a company that owns around 970,000 sows and eight packing plants definitely qualifies as news. The discussion about the sale has not been limited to World Pork Expo. Many economists and media outlets are also analyzing the potential outcome of this sale. If the proposed acquisition of Smithfield is approved, it would be the largest acquisition of an American company by a Chinese company in history.

Some people are concerned about biosecurity risks posed by staff that may travel back and forth between China and the U.S.  Other people are concerned about food safety. This week Senator Debbie Stabenow (D-MI), chairwoman of the Senate Agriculture Committee urged the Committee on Foreign Investment and other agencies responsible for reviewing the merger to take into account, “China’s and Shuanghui’s troubling track record on food safety,” and to “do everything in their power to ensure our national security and the health of our families is not jeopardized,” according to Food Safety News. The Senator notes that two years ago, Shuanghui International admitted to putting illegal additives in its food products.

On the positive side, as Meyer explains, if additional pork is exported to China, U.S. producers could see prices rise. Raoul Baxter, a former Smithfield Foods executive, recently wrote a blog post for the Meatingplace.com Web site entitled, “Shuanghui: What’s the big deal?”  He explains that while international deals are never perfect, the Smithfield sale to Shuanghui could be greatly beneficial to the entire U.S. pork system.

 

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USA Today’s editorial board presented opinions on the positive and negative sides of the sale this week, too. The editorial board asks, “Is pork a strategic asset that America should guard?” The possibility of the acquisition improving quality control in China is discussed. The editorial board does express concerns about the inequities in U.S.-China commercial relations—and notes that China’s restrictions on foreign ownership mean that U.S. companies that enter the Chinese market face restrictions and regulations that greatly reduce their ability to compete with state-owned companies.

 

No doubt, the questions are perplexing. What do you think about this acquisition? Please feel free to share your thoughts in the “Comments” section below, or email lora.berg@penton.com. Check out the thoughtful comments readers have already posted related to Meyer’s column. National Hog Farmer will continue to provide updates as this story develops.

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