North Carolina Pork Being Sent to China

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Last week China’s Shuanghui International agreed to purchase the world’s largest pork producer, Smithfield Foods, for $4.7 billion and take the publicly traded company private.  Smithfield Foods is a Virginia based company that has a strong history and presence in North Carolina. 

In 1992, Smithfield Foods opened the world’s largest meat processing plant in Bladen County, and by 1998 North Carolina’s hog population had grown by 8 million.  In 2007, Duplin County was the nation’s leading county in hog and pig sales, with to 4% of the total U.S. value ($724 million).  According to the USDA, the nation’s hog operations are concentrated in the Midwest and eastern North Carolina, as you can see from the map below. 

Many have voiced concern over the Smithfield takeover and what it means for the 10,000 employees in North Carolina.  Shuanghui International has said that Larry Pope will continue as president and chief executive officer of Smithfield and that the existing management teams and workforces will remain in place after the transaction.  This statement is still speculative since the Committee on Foreign Investment will review the buyout and some of the details could change before the transition is complete.

Pork Production Facts

• 
  The world's largest pork producer is China followed by the United States.  In December 2011, the USDA estimated almost 66 million hogs and pigs were in the United States; of that 60 million were market hogs.
• Pork is the most consumed meat in the world.
• In 2012, US pork exporters set new records, with exports worth $6.3 billion.
• The largest customers of US pork exports are Japan, Mexico, and China.
• The largest US imports of pork come from Canada and Denmark
• The United States' main competitor for pork export sales is Canada for sales to Mexico.  The other main competitor is the European Union for sales to Japan.

Looking to the Future for Pork

The idea that Americans will be eating Chinese pork is a far cry from reality.  The transaction is purely business, for China and the US export market.  The Chinese have very strict regulations, and at the current time no foreign corporation has access to the Chinese pork market.  This deal will allow Smithfield to hold a large share of the Chinese pork market and increase the United States’ export business to China. 

For example, last year Japan imported 455,000 tons of pork worth $1.9 billion.  While China and Hong Kong paid less for their pork, since their wealth is less, they imported nearly the same amount (431,000 tons).  Pending the completion of this deal, Smithfield could become the dominant player in the Chinese pork market and eventually increase the demand for North Carolina grown pork.

While anxieties over the latest food scares in China have some concerned about the impact on Smithfield’s quality, there is hope.  Forbes published an article about this topic that addresses the food quality future and the impact Chinese regulations will have on American pork:

U.S. pork producers have repeatedly run into trouble in China over their use of ractopamine, a drug that is also banned in Russia and the European Union. In March, China adopted stricter standards that require U.S. suppliers to certify their pork as ractopamine-free…. As a side note, it’s ironic to see China setting U.S./global standards on additives in meat, given the rampant abuses in its own industry.

So what does this buyout mean for North Carolina pork production in the future?  My guess is that we will see North Carolina’s export market increase and, at the end of the day, this will end up being a positive economic driver for the North Carolina pork industry.

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