A pork-filled deal between Smithfield and Shuanghui, but who wins?

Mark Garrison May 29, 2013
HTML EMBED:
COPY

A pork-filled deal between Smithfield and Shuanghui, but who wins?

Mark Garrison May 29, 2013
HTML EMBED:
COPY

China is buying $4.7 billion worth of American bacon. Chinese meat producer Shuanghui International is taking over Smithfield Foods, the world’s largest pork producer. If the deal goes through, it’ll be the biggest Chinese takeover of an American company.

As business stories go, pork mergers don’t exactly capture the imagination. But for Americans making a living off pigs, a deal like this is wild boar-sized news.

In the largest pork-producing state, Iowa, there’s optimism that Chinese ownership could help more of America’s hogs overcome trade hassles to reach the world’s largest market. The meat is so important in China that the government has a strategic pork reserve. Chinese are eating more pork than ever.

“With growing demand internationally, we could see likely increases in production would mean increases in jobs,” says Iowa State University livestock economist Lee Schulz.

Over in another big pork state, North Carolina A&T agriculture professor Osei Yeboah has been to China to survey consumers and drum up demand for American pork. Perhaps because China has seen its share of tainted food scandals, pork lovers there see the U.S. product as higher quality than domestic meat.

Smithfield already exports to China, and Yeboah thinks will sell even more once Chinese consumers know that Smithfield is Chinese-owned.

“That will translate into higher prices if the demand goes up,” Yeboah says.

Higher prices are good for farmers, though painful to bacon-crazed shoppers. But new access to Chinese markets won’t drive up American retail prices if hog farmers ramp up supply. Other analysts don’t fear ham inflation.

“Right now I don’t anticipate any higher prices for shoppers in the United States because we have other companies that produce pork as well,” says University of Georgia agricultural economist James Epperson. “It’s a pretty competitive business.”

Epperson wants to see the deal examined for potential impact on America’s food supply. A U.S. government panel has to sign off on the Chinese takeover after reviewing any national-security concerns.

Marketplace is on a mission.

We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.

Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?

Your donation is critical to the future of public service journalism. Support our work today – for as little as $5 – and help us keep making people smarter.