This little piggy went to market
“Say it ain’t so, Joe” recently took on new meaning in the Southeast with the announcement in late May of Smithfield Foods’ agreement to be acquired by Chinese food giant Shuanghui International Holdings.
If the deal, currently valued at $4.7 billion, goes through, it will be the largest U.S. acquisition ever by a Chinese company, dwarfing other recent U.S. acquisitions by Chinese companies in the industrial, media and energy sectors, as well as Lenovo’s celebrated 2004 acquisition of IBM’s PC division. According to the Wall Street Journal, the origins of the deal go back seven years or so when Smithfield Board Chairman Joseph W. Luter III first began talking with leaders at Shuanghui about some type of integration. About this time many barbecue lovers in the Carolinas must be wondering where Shoeless Joe Jackson is when you need him.
As of mid-June, however, most analysts think the deal will be approved — after all, pork products aren’t WMDs (at least not immediately!). As Smithfield’s CEO Larry Pope recently put it, “Were not exporting tanks and guns and cyber security. These are pork chops.”
Fair enough, but it should be pointed out for the record that products mean different things in different places, and in China pork means an awful lot. That’s why China -- and China alone -- maintains a “strategic pork reserve,” created in 2007 to reduce the risk of a supply shortage in the country’s favorite meat, which could prove not merely inconvenient, but socially destabilizing.
In 2012 China produced just under half of the world’s 105.5 million metric tons of pork, and consumed even more. The 27 nation-states comprising the EU together accounted for just over 21 percent of world production, and the U.S., the third largest producer, accounted for a little over 10 percent.
With per capita income rising rapidly in China, demand for foods of higher income-elasticities such as meat is growing as well; hence, the desire by the Chinese to secure adequate supplies in the years ahead. This goal is particularly important in light of the well-publicized problems regarding food safety in the PRC itself, which problems were punctuated quite emphatically in February and March of this year when over 16,000 diseased pig carcasses were pulled out of the Huangpu River just outside of Shanghai.
Not for nothing, then, is this deal important for China. And the country’s porcine policy is evident as well in its burgeoning imports in recent years of U.S. and Brazilian corn and soybeans, much of which are used as animal feed for its stocks of domestic swine.
A pork chop may only be a pork chop, but it behooves us to think of food in strategic terms, particularly in light of the President’s touted diplomatic and military pivot to Asia. If we’re going to “lose” ownership of an iconic southern firm to China, we might as well make sure we know the value as well as the price of pork, especially if we wish to save our diplomatic bacon. Smithfield is not selling Shuanghui “a pig in a poke.” We may even have the Chinese over a (pork) barrel in this case.
Peter A. Coclanis is Albert R. Newsome Distinguished Professor of History, and Director of the Global Research Institute at the University of North Carolina-Chapel Hill.