Chinese consumers soon could be in line for a lot more U.S. pork in mainland grocery stores.
Shareholders in Smithfield Foods voted Sept. 24 to approve the company’s $4.7 billion purchase by Shuanghui International Holdings, the largest acquisition of a U.S. company by a Chinese business.
Smithfield processed 27.7 million hogs in fiscal 2012, according to a report filed with the Securities and Exchange Commission, and exports made up 18 percent of the company’s pork sales that year.
Exports are expected to grow substantially. Shuanghui’s interest in Smithfield was tied to its desire to gain access to a large supply of pork that would be viewed as high quality by Chinese consumers. A series of food safety scandals in China has led consumers there to seek meats and produce imported from the U.S. because they are seen as safer products.
Although increasing exports are likely to tighten U.S. domestic supplies, the industry believes that will be temporary because Smithfield is expected to raise and slaughter more hogs to meet demand. Smithfield currently has capacity to process about 40 million hogs a year, according to the SEC report.
Even before the Smithfield buyout, China was a huge market for U.S. pork producers, ranking only behind Japan and Mexico as destinations last year.
Smithfield also is targeting other export markets. In May, the Smithfield, Va.-based company announced it converted half of its pork production business to being ractopamine-free. The chemical additive is used to promote lean muscle growth in swine and cattle, but a handful of countries have banned it. By eliminating ractopamine, Smithfield again can sell to Russia, a huge market for U.S. pork before the import ban was implemented last February.