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Pork Producer Acquisition Raises Questions on Hill

Peter Parks/AFP/Getty Images File Photo
Some have raised concerns that the sale of Smithfield pork to one of China’s biggest meat processors will affect the quality of its product and hurt U.S. pork producers.

Committee members framed their concerns around the idea of China, a growing economic and political rival of the United States, gaining control over a company that controls 25 percent of the American pork market. They said security of the U.S. food supply should be as much of a consideration during the Treasury Department’s review of the proposed sale as military national security.

They also cited China’s food and pet food manufacturers’ poor food safety record as a reason to question whether Shuanghui will flout U.S. food regulations. And they said they are worried that a Smithfield-Shuanghui company will eventually import Chinese pork products — raised and produced under questionable conditions — to the United States.

Agricultural economists say that after factoring in feed costs and transport expenses, it would make little financial sense for the new company to do so.

In his appearance before the committee, Pope stressed that the new company would focus on exporting its products. He noted, however, that imports would be subject to U.S. inspections and food safety laws.

Agriculture Committee member Charles E. Grassley said he wants to know what the effect of a Smithfield-Shuanghui merger will mean for pork producers in the Midwest.

“As Smithfield becomes even more capital rich, is there a potential for non-Smithfield growers being shut out of the marketplace? Will the independent producer be able to market their product and get a fair price?” the Iowa Republican asked before the hearing.

Grassley said he was not ignoring the prospect that the Smithfield sale could mean greater access for his Midwestern farmers to China, where affluent consumers are willing to pay a premium for U.S. goods.

But Chandler Goule, chief lobbyist for the National Farmers Union, said these are benefits a number of hog farmers may not be able to enjoy. His organization has joined a coalition of environmental and consumer groups in urging the Treasury Department’s Committee on Foreign Investment in the United States to block the sale. Goule said the proposed Smithfield sale raises concerns among his members because they see it as a variation of a business trend they believe has forced farmers to either become contract growers to meatpackers or to leave the industry.

“The poultry industry has been demolished. It is so vertically integrated that it will be very difficult to bring poultry back. Pork is right behind it. In the next 10 years, it is going to look exactly like the poultry industry,” he said.

Every day, thousands of cattle, hogs and chickens are shipped to slaughterhouses under private agreements that ranchers and farmers sign with a few giant meatpackers. The arrangement is good for packers and processors, who can ensure reliable supplies at predictable costs, and for participating producers, who lock in revenue and are largely sheltered from volatile markets.

But the NFU says the arrangement lets a handful of big meatpacking companies dictate prices and control markets. As bad as the situation is, Goule said, it could become worse as consolidation goes global.

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