The trade relations between the US and Chine has got a boost after the Smithfield Foods China deal. US-based pork producer, Smithfield, has signed a deal with Shuanghui International Holdings, one of the leading meat processors of China. The $4.7 billion deal will bolster trade ties between the two countries to a great extent in the coming years. Smithfield shareholders will receive $34 per share under the deal.
Smithfield is the largest pork processor and hog producer in the world. It sells packaged products to a number of reputed brands, including Cook’s, Armour, Farmland and Smithfield. Shuanghui is a company based in Hong Kong. It produces flavouring products, logistics and food. This is one of the biggest shareholders of the largest meat producer in China, Henan Shuanghui Investment & Development. According to analyst Tom Graves of S&P Capital IQ. China, this deal would bring about the perception of quality, as the US pork products played an important role in the deal. Shuanghui Chairman Wan Long stated that the company would benefit from gaining access to competitively prices and high-quality US products, which are considered to be safe.
The deal enables Smithfield to get an opportunity to increase its exports. China is a big consumer of pork products, gaining around 11% of the worldwide annual sales exports. Timothy Ramey, an analyst of of D.A. Davidson & Co.Stated that the acquisition presents an opportunity for material export for Smithfield and this would benefit the hog farming industry in the US, in general. The increment in exports by Smithfield can bring about an upward pressure on the pork prices in the US. Back in 2011, Shuanghui was selling clenbuterol-laced old pork, which was a banned veterinary drug, associated with risks for the health of humans. According to certain critics, this deal may bring the food safety issues into concerns. This would require more scrutiny to ensure safety.