Smithfield Foods can be traced to 1936, when Joseph W. Luter, Sr. and his son, Joseph W. Luter, Jr., opened the Smithfield Packing Company in Smithfield, Virginia.
But last week, a Chinese company bid $4.7 billion to take over Smithfield Foods. Wang Long, the 72-year-old chairman of Shuanghui International Holdings Ltd., claims he hopes to learn US expertise and technology to help reshape food safety and production in China’s pork industry.
“The question of food safety, whether it’s to American consumers or Chinese consumers, is a big deal,” Long told Bloomberg News. “Our nation has a tighter and tighter grip over food safety.”
Food safety indeed. Consider the Chinese scandals involving the deaths of at least six babies in 2008 because of melamine-tainted milk, and the more recent discovery of more than 12,000 dead pigs in Shanghai’s Huangpu river.
“Shanghai’s government said last month it was testing some mutton after police busted a ring selling rat, fox and mink as meat.”
To reassure consumers about food, China created a new administration in March charged with overseeing food and drug safety in the country. Premier Li Keqiang recently discussed committing a large amount of money for food safety to build up people’s confidence in what they eat.
Bloomberg’s Andrew Hobbs notes buying Smithfield would give Shuanghui access to more advanced production technology as well as 460 farms that raise about 15.8 million hogs a year.
We call the slaughter industry the sunshine business, said Long. “Although it’s a traditional business, if you do it well, it is a sunshine and profitable business. Our goal is to be the biggest in China, and the leading meat supplier in the world.”
David Barboza with the New York Times claims behind the bid was a “group of savvy investors and global deal makers with a substantial stake in the Chinese company: Goldman Sachs, CDH Investments, Singapore’s sovereign wealth fund and New Horizon Capital, a private equity firm co-founded by the son of the former Chinese prime minister Wen Jiabao.”
The group controls nearly half the shares of Shuanghui International, a huge $7 billion dollar firm that is the dominant sausage maker and pork processor in China.
“China spends tens of millions of dollars every year importing U.S. piglets or breeding swines because the U.S. has much better technology in that field,” said Li Qiang, chairman of Shanghai JC Intelligence Co., an agricultural research company. Increased pork imports would also cut pollution at home, Li said.
Hobbs point out that pig farming consumes large amounts of crops and water, and produces pollution, while urbanization is reducing the supply of land in China.
According to James Feng, general manager of Soozhu.com, China’s biggest independent hog researcher, “Buying Smithfield is to secure the supply of feed and water to pigs for Shuanghui. The U.S. has sufficient farming land and water resources,” Feng said.