USSEC is expressing optimism over the recent acquisition of Smithfield Foods, the world’s largest pork producer, by Shuanghui, the largest meat processor in China. Shuanghui’s portfolio includes meat processing, hog production, consumer meat production, flavorings and logistics. Shuanghui is privately owned and led by CEO Wan Long. Shuanghui was founded in 1958 as a state owned meat processing plant headquartered in Luohe, Henan province but became a private enterprise in the mid 1980s when the Chinese government encouraged entrepreneurs to take non-productive state assets private. In Mr. Wan’s first year of private operation Shuanghui posted a profit of $1.7 million. Shuanghui introduced the first branded meat product in China in 1992 and went public with a listing on the Shenzhen stock exchange in 1994. It has over 1000 branded products in China.
Smithfield reports annual revenue of $13.1 billion and an annual production of 15 million head with 27 million heads processed, translating to 6 billion pounds of pork; the company has 46,000 employees at 26 facilities. Shuanghui reports its annual revenue to be $6.24 billion with 400,000 head, 15 million heads processed, with 60,000 employees at 13 facilities. Smithfield has been under recent pressure from one of its largest shareholders, Continental Grain, to consider breaking up the company, especially divestment of Smithfield’s international operations in Spain, Romania and Poland. Shuanghui wanted to finalize this purchase before any possible split when assets currently owned by Smithfield would be unavailable.
According to USSEC North Asia Regional Director Paul Burke, the positive implications for U.S. soy are twofold. First, the purchase of Smithfield by Shuanghui will not diminish the demand in China for U.S. soybean exports as Chinese per capita consumption of pork are less than 50% of Hong Kong’s per capita consumption. For Chinese consumption to reach a level equivalent to Hong Kong’s consumption, China will need to import and/or increase pork production by 48 billion metric tons (MT). Shuanghui is not as integrated as Smithfield and would most likely need to import vertical swine management production technology from Smithfield which relies on increased utilization of a soy/corn feeding ration. Second, the purchase of Smithfield by Shuanghui should lead to an increase of exports of U.S. pork products as Shuanghui will be able to customize production in U.S. plants to meet its Chinese demand. Smithfield has indicated that it has extra production and procession capacity that could be directed to future Chinese demand. The implications of a Chinese owned / U.S. owned pork exporter means that there will be a Chinese business interest better able to lobby the Chinese government for open access to that market for U.S. produced and processed pork.