Friday 31 May 2013

How Will Smithfield Deal Impact Global Agriculture?



In what could be the largest ever Chinese takeover of an American company, pork producer Shuanghui International has reached a deal to buy Smithfield Foods, a Virginia-based food conglomerate. From the New York Times:


If completed, the deal that was announced on Wednesday would be the biggest takeover of an American company by a Chinese concern. But it must first overcome skepticism in Washington — and a potentially close examination process by United States regulators. Both Smithfield and its suitor, Shuanghui International, said that they will submit the deal for review by the Committee on Foreign Investment in the United States, or Cfius, a panel of government agencies tasked with clearing deals for national security.

Typically, the committee is concerned with acquisitions that involve technology or vital natural resources. The nation’s food supply chain is not specifically mentioned in its mandate, but the panel’s jurisdiction is considered broad. Among the deals it has reviewed and approved in recent months are the proposed takeover of Nexen Energy by a Chinese oil company and the proposed sale of control of Sprint Nextel to a Japanese telecommunications firm.

The committee may consider whether Shuanghui has ties to organizations like the Chinese army, as well as whether Smithfield’s customer rolls include sensitive information like the locations of secure military installations.

Some opponents of the deal have raised concerns about China’s notorious food safety record, especially when it comes to pork. From Reuters:


And at least one member of Congress said the deal raised alarms about food safety, noting Shuanghui was forced to recall tainted pork in the past.

“I have deep doubts about whether this merger best serves American consumers and urge federal regulators to put their concerns first,” U.S. Representative Rose DeLauro, a Democrat from Connecticut, said in a statement.

Shuanghui is already majority shareholder of Henan Shuanghui Investment & Development Co (000895.SZ), China’s largest meat processor. It would join forces with a company that has a worldwide herd of 1.09 million sows, according to industry data compiled by Successful Farming magazine. [Source]

But under the deal, Shuanghui would buy U.S.-produced pork, in an effort to fill the growing demand for meat in China and to appease food safety concerns among Chinese consumers. CBS News reports:


They need the food, according to CBS News contributor and analyst Mellody Hobson. “That’s the bottom line,” she said. “China is the biggest consumer of pork in the world.”

Food safety issues in China, as well, are another reason for the interest in Smithfield. She explained, “(Shuanghui will) get the safety of the United States and our methodology and our standards.” [Source]

Yet the prospect of exporting the methodology and standards of U.S. factory farms has raised a number of concerns from environmentalists and public health experts. From NPR:


Elizabeth Holmes, a staff attorney at the Center for Food Safety, says U.S. regulators should take a hard look at the deal.

“They’re supposed to identify and address any national security concerns that would arise,” she said of the committee. “I can’t imagine how something like public health or environmental pollution couldn’t be potentially construed as a national security concern.”

Environmental groups were quick to criticize the deal, too, citing the growing globalization of vertically integrated or factory farming. [Source]

In Mother Jones, Tom Philpott writes about environmental damage of factory farming in the U.S. that will be exacerbated by this deal, and its implications for the future of global agriculture:


As I have pointed out, the US pork industry is no prize either—it pollutes water as a matter of course, hollows out the rural areas on which it alights, relies heavily on routine antibiotic use, recently inspired a government watchdog group to lament “egregious” violations of food safety and animal welfare code in slaughterhouses, and uh, has an explosive manure foam problem.

So forget about where HQ is for the vast conglomerate that ultimately profits from running Smithfield’s factory-scale hog farms and slaughterhouses. The real question is: What does this deal telling us about the global food system and the future of food? [Source]
Oriignal Article Here

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