Sino-US pork deal is destined to bring home the bacon for both sides

By RJ Whitehead

- Last updated on GMT

Related tags Charoen pokphand

Sino-US pork deal is destined to bring home the bacon for both sides
While it is expected that the Shuanghui takeover of Smithfield Foods will take place once it is rubber-stamped by American authorities, the union will hardly be blessed in the US.

This week, China’s biggest pork producer agreed to pay US$4.7bn in cash to secure ownership of its Virginia-based counterpart. The takeover, once upheld by the government, will amount to the biggest ever Chinese acquisition of an American company.

Of course, no nation likes to see its iconic names fall into the hands of overseas buyers, no matter how beneficial a deal will be in the eyes of shareholders. But when it comes to the food industry, the critics become more sensitive, and with good reason.

Stories of thousands of diseased pig carcasses floating down Chinese rivers will still be fresh in the minds of many consumers. Those who take a passing interest in what they eat will know about growth additives like clenbuterol lacing some Chinese pork products, resulting in headaches, nausea and irregular heartbeat in humans.

When consumers see a deal like this on the business pages, many will immediately wonder whether China is looking at new routes for its pork export market, making Americans the latest beneficiaries of what they see as diseased and chemically enhanced pork.

The reality, however, is the opposite. Exports will take place, but not in the direction the naysayers are citing.

While America has been going through recession, China has boomed, meaning that an increasingly sizeable middle-class has brought continuing greater demand for protein now they can afford it.

While not apologising for some of the more sickening examples of China’s food safety breaches, we see them as a symptom for this growth. To accommodate the growing masses of pork devotees, a production system that is already under pressure is bound to see some unscrupulous players cut corners to the detriment of both the industry and consumer confidence around the world.

US4.7bn is a huge investment, but it will be one that serves Shuanghui – and wider China – well. It is the price the company will pay in order to deliver more foreign (for this, read pestilence free) hogs to bring a new level of quality to the market. It could even open up a new segment for premium consumers.

For the record, though, American critics might look at the takeover with shock and horror, but they would do well to consider their own pork industry, which is not entirely untainted.

Smithfield, itself America’s biggest pork producer, has polluted rivers with millions of gallons of pig excrement, and has a history of using ractopamine (which is illegal in China). Across America, slaughterhouses are in a state, with even the USDA appearing powerless to raise standards.

Of course, the American regulators will have to look into these issues, and in the meantime Shuanghui will have to beat off rival offers from Brazil’s JBS SA and Charoen Pokphand of Thailand.

But if and when approval does come, and the two companies sign the biggest ever Sino-US agreement, it is clear that both sides should benefit.

Have your say: What do you think of this Big Pork deal? Let us know in the box below.

Related topics Policy Food safety Meat China East Asia

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