Chinese company to buy Smithfield Foods; Business boon or disaster?
To meet China's insatiable demand for pork, scandal-ridden Shuanghui International is turning to an American company to help 'bring home the bacon.'
Fri, May 31, 2013 at 07:45 AM
The recent news that the biggest pork firm in China is buying Smithfield Foods, America's largest pork producer, is inspiring unease in environmentalists, food safety experts and animal activists across the country.
The deal, in which China's Shuanghui International has agreed to pay cash for the Virginia-based Smithfield Foods, values the firm at $7.1 billion (including debt). It will be the largest takeover of a U.S. company by a Chinese firm, and shines a spotlight on China’s desire to secure global resources to meet increasing demand. China is the world's largest pork consumer.
The food situation in China is abysmal, as evidenced by the glut of food safety problems in a country mired in toxins, pollution and poorly enforced regulation. Melamine was added to pet foods and baby formula (resulting in the 2008 deaths of six infants and 300,000 cases of illness). Unsafe levels of cadmium have been measured in rice. There was the honey laundering scandal; and the 16,000 dead pigs in the Shanghai River, followed by 1,000 ducks dumped in another river. The U.S. doesn't allow imported meat from China because of continuing outbreaks of hoof and mouth disease. And most recently, meat being sold as mutton was found to be not the meat of mature sheep, but a mix of fox, rat and mink meat doctored with gelatin, pigment and nitrates.
“We should definitely give the Chinese an award for creativity in adulterating foods,” said Jeff Nelken, a food safety expert. “They are a great resource for counterfeited foods.”
Of all the food scandals originating from China, none may be more relevant now than the one involving Shuanghui International itself. In 2011, China's CCTV revealed that Shuanghui's pork products contained the banned chemical clenbuterol, which is used to make animals grow faster and to make the meat leaner. According to the USDA, clenbuterol residues can affect lung and heart function in those who eat the meat of animals given the drug.
Shaun Rein, founder of China Market Research, says Shuanghui is making a "very good" purchase given the damage that their reputation suffered following clenbuterol-gate.
"Having that American label is going to build trust with consumers," he told the BBC. "The number of pork imports grew 500 percent between 2010 and 2011. Despite the cooling economy in China, consumers are willing top pay premium on safe food."
Smithfield, parent company to Farmland, Armour and Healthy Ones brands, said the deal will allow the company to increase sales abroad.
"This is a great transaction for all Smithfield stakeholders, as well as for American farmers and U.S. agriculture," Smithfield Chief Executive Larry Pope said in a statement.
Everyone seems to agree that the deal will create increased U.S. pork exports to China, including the possibility of Shuanghui ratcheting up production to feed the growing demand for meat. But not everyone agrees that increased production is such a good thing.
Environmental groups are expressing concern, citing the growing globalization of factory farming. Industrial farming and agriculture are wreaking enough havoc at current rates of production. And as it stands, Smithfield operates with egregious and "infuriating disregard for the welfare of their animals," says New York Times food guru Mark Bittman.
Wenonah Hauter, executive director of Food & Water Watch, is calling the merger the "birth of a cross-border bacon behemoth." She says, "Merger mania in the meat industry in recent decades has led to more factory farms in the U.S., with 95 percent of hogs now raised in operations of over 2,000 animals."
Manure is already a major problem in the U.S.; more hogs will only lead to more pollution.
"We may export the pork, but we keep millions of gallons of manure right here in U.S.," she added.
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