Top 10 reasons to love the China deal

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There are dozens of reasons for American farmers and ranchers to be thrilled — nay, elated! — by Shuanghui International Holding Inc.’s proposed $4.7 billion purchase of Smithfield Foods, Inc., America’s biggest pork chop. Here are 10.

10: Getting our money back

The U.S. gets back some of the dollars held by China. While $4.7 billion is chicken feed compared to the $1.2 trillion of U.S. debt (about 7.5 percent of our $16 trillion total) China holds, look at the bright side: If it buys 300 more U.S. companies the size of Smithfield they’ll own us, not our money.

In buying Smithfield, China, not Virginia, will be home for “one of the worst-performing large U.S. food companies over the past five years,” according Bloomberg News.

In fact, explained Bloomberg May 31, Smithfield’s “negative return of 18 percent in the five years through March 28, [2013]” was the second worse record for “any U.S. food company with annual sales of $10 billion or more.”
The worst? Another farm favorite: Bunge Ltd., figured Bloomberg.

8: Managment stays in place

Shuanghui plans to keep in place the top five of the Smithfield management team that delivered those stinky results and pay them an estimated $85.4 million in bonuses once the deal is completed.

Reports that Smithfield’s key American competitors — like Triumph, Seaboard, The Maschhoffs, Prestage, Tyson, Cargill and Hormel — danced for days in their farrowing houses upon hearing the news are mostly exaggerated. It was just hours.

7: No Chinese pork in U.S.

Shuanghui claims this deal is a wide one-way street; Smithfield’s American-bred, born and butchered hogs will flow to China and no Chinese pork will float to the U.S. either by ship, raft or river.

Promise?

6: Bring in the imports

Smithfield’s Wilmington, N.C., port facility can now be used to import South American corn and soybeans — as it was in the summer of 2012, according to several published reports — for its 862,000 Chinese-owned sows in the U.S. rather than its 862,000 American-owned sows in U.S.

5: Pork checkoff

Ironically, when (if, in some government circles) the buy-out is complete, a Chinese company — which farrows, feeds and slaughters about one in five American-grown hogs each year — will pay an estimated $16 million to the mandatory, non-refundable U.S. pork checkoff, based on 2012’s total checkoff collections of $81 million.

And, irony upon irony, that amount is more than double the $7 million the pork checkoff budgeted last year to boost, as its strategic plan explains, the “U.S. share of global exports of pork” by 2014.

“Sell Smithfield to a Chinese company,” however, was not part of the checkoff’s published strategy.

4: Greater exports to China

Most analysts predict the purchase will lead to greater U.S. pork exports to the Forbidden Kingdom.

That would be a good thing because American per capita pork consumption, on a carcass basis, continues to slide, down 12 percent (from 66.9 lbs. to 59.2 lbs.) in the last decade, according to USDA’s Economic Research Service.

3: The company isn’t communist

“Unlike other Chinese companies that have loomed large on the world stage,” reported the Wall Street Journal, May 30, “Shuanghui isn’t state-controlled.”

Translation: the country is communist; the company probably isn’t.

2: “Made in the U.S.A”

Unlike many U.S. livestock groups and their meatpacker allies, Shuanghui will label all American pork sold in China as “Born, raised and slaughtered in the United States.”

That label is worth, oh, say $4 billion or more in China, right now.

1: Hocks for hacks

And the Number 1 reason to rejoice for the Chinese takeover of Smithfield?

Maybe the world’s top pork eaters will be so busy chewing American babybacks that, as reported by the Washington Post just two days before the Smithfield buy-out was announced, many of America’s “most sensitive advanced weapons systems” will be safe from “Chinese hackers” who already have “breached… programs critical to U.S. missile defenses and combat aircraft and ships.” Hocks for hacks, as it were.

About the Author

Alan Guebert was raised on an 800-acre, 100-cow southern Illinois dairy farm. After graduation from the University of Illinois in 1980, he served as a writer and editor at Professional Farmers of America, Successful Farming magazine and Farm Journal magazine. His syndicated agricultural column, The Farm and Food File, began in June, 1993, and now appears weekly in more than 70 publications throughout the U.S. and Canada. He and spouse Catherine, a social worker, have two adult children. farmandfoodfile.com More Stories by Alan Guebert

One Comment

  1. Retired Corn Farmer + JD says:

    …this all sounds great, Alan, BUT I would not trust a China-man as far as I could throw him. Chinese pet food killed many US pets; Chinese laced their own baby formula with melamine adulterants causing great infant health issues.

    wanna bet no Chinese pork gets into America? …yeah, right…like all the other lies and “baloney” (this is a family site) we’ve been told.

    China’s track record: In recent weeks, China’s news media have reported sales of pork adulterated with the drug clenbuterol, which can cause heart palpitations; pork sold as beef after it was soaked in borax, a detergent additive; rice contaminated with cadmium, a heavy metal discharged by smelters; arsenic-laced soy sauce; popcorn and mushrooms treated with fluorescent bleach; bean sprouts tainted with an animal antibiotic; and wine diluted with sugared water and chemicals. Even eggs have turned out not to be eggs at all but man-made concoctions of chemicals, gelatin, and paraffin. Instructions can be purchased online, the Chinese media reported. (source: http://www.ift.org)

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