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Farm Trade supports Smithfield deal

05/30/2013 @ 6:58am

Smithfield Foods Inc.'s planned acquisition by Shuanghui International Holdings Ltd. reflects a booming U.S.-China trade in agricultural goods that has largely benefited American farmers.

Analysts predicted it could be seen by other U.S. agribusinesses more as a model than a threat, showing the need for other meat companies to focus more on a growing overseas customer base for themselves and big meat-buying clients like McDonald's Corp.

Pork companies' customers "are global, multinational companies like McDonald's," said Altin Kalo, an analyst with Steiner Consulting Group, an industry consulting firm in Manchester, N.H. "To serve those accounts, they need to have more heft."

Rising incomes in China have propelled sharp growth in consumption of meats and other farm goods. The world's most populous country is the biggest buyer of U.S. soybeans, and an increasingly important market for corn. China last year imported 431,145 metric tons of U.S. pork, according to the U.S. Meat Export Federation. That was still a small share of China's total consumption of 52.7 million metric tons of pork in 2012.

"It's a big opportunity," said Steve Meyer, a meat-industry economist with Paragon Economics Inc. in Des Moines, Iowa. China lacks the capacity to meet growing pork demand domestically, he said. "They just can't do it. There's not enough arable land to produce enough feed."

U.S. pork consumption, meanwhile, fell nearly 6% to 8.4 million metric tons in the five years through 2012, according to U.S. Department of Agriculture data.

China's food industry has experienced a series of scandals involving tainted meat and other goods. Some consumer advocates pointed to those concerns as reasons to worry about the deal. "Overseas ownership can only complicate and shield potential future food safety problems from U.S. oversight," said Wenonah Hauter, executive director of Food & Water Watch, a Washington, D.C.-based group.

Executives from Shuanghui and Smithfield tried to head off such arguments in a conference call Wednesday, emphasizing that they don't intend to sell any Chinese-made pork in the U.S.

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Curt Thacker contributed to this article.

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(END) Dow Jones Newswires

May 29, 2013 19:53 ET (23:53 GMT)

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