The recent news that China's Shineway (Shuanghui International Holdings Ltd.) has agreed to purchase Smithfield Foods Inc., the largest hog and pork producer in the world, leaves much speculation for a rise in U.S. pork exports to China in coming years.

However, according to the U.S. Grains Council, the resulting increased pork import program is unlikely to hold off China's expected future corn import program.

Bryan Lohmar, USGC director in China, says it will be extremely difficult for Shineway to significantly increase U.S. pork exports to China simply through its control of Smithfield in coming years.

"Let's say Shineway seeks to increase U.S. pork to China by 1 million metric tons per year. Even if it does somehow manage to increase production and meet such an ambitious export target, that much additional imported pork would displace only 3-3.5 million tons (118-138 million bushels) of corn demand in China, or less than 2 percent of China's total corn demand," he said.

"Considering USDA forecasts nearly 20 million tons (787 million bushels) of annual corn imports in China within the next 10 years, even this large hypothesized increase in pork exports would only reduce projected imports by less than 20 percent."

Lohmar goes on to say that boosting U.S. pork exports by such a large amount will be difficult for both physical and political reasons.

Smithfield's total U.S. pork production is estimated at just over 2 million tons in 2012. "Expanding production by an amount significant enough to put a sizeable dent in China's corn import program would require enormous growth. This growth would take time, require new facilities, and would almost certainly be faced with environmental and other interests that are already challenging the expansion of large swine operations in the United States," said Lohmar.

Such an increase in China's pork import program would also be challenged by China's large and rapidly growing modern pork industry, particularly if it comes from only one player, Shineway.

While Shineway is one of the largest pork producers and the largest processed pork producer in China, it still represents only a small part of China's total pork production, and there are many other large players with interests in China's domestic swine industry.

Shineway itself has substantial pork production investments in China and would not want to diminish the value of those investments, Lohmar says.

As the company itself stated, Shineway is likely much more interested in improving both its production practices and also improving management of its integrated pork operations.

Like Smithfield, Shineway has a farrow-to-retail supply chain with branded products sold throughout China. Managing this supply chain and the various risks involved while ensuring integrity to build its brand is a daunting challenge.

Learning how Smithfield successfully accomplished this in the United States and other countries is likely the main benefit to Shineway. Access to Smithfiled's modern pork production practices, genetics and technologies is also a major benefit. Together, these benefits could easily justify the price Shineway is paying for Smithfield.

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