The Chinese-Smithfield Connection
An equity stake in the world’s largest pork integrator has been taken by the organization that aims to be China’s biggest pork producer within the next 3-5 years. The purchaser is China National Oils, Foodstuffs and Cereals Corporation, a state-run agency better known as Cofco that trades in farm products. It has bought almost 5% of the shares in Smithfield Foods of the USA, in a move that reduces Smithfield’s debt-to-equity ratio. The purchase was cleared by US antitrust regulators at the Federal Trade Commission.
Cofco has been reported previously by Pig International to have gradually increased its pig production interests in the central region of China after starting about 6 years ago. One recent estimate was that the organization’s current contract pig production scheme in Hubei province could generate 500 000 pigs/year. But the target set by Cofco’s directors is a nationwide network capable of producing 10 million slaughter pigs annually.
Unusually for China, there is a ‘green‘ element to the plans. Cofco already has an environmentally certified pigs scheme and has assembled a budget reckoned to be as high as US$1.75 billion to spend on a program for improved ecology in pork production.
One feature is the allowance of extra floor space per pig to provide more welfare-friendly conditions. Now it wants to tap into Smithfield’s know-how on the large-scale production of lean and healthy pigs. Its purchase of shares has led to the nomination of Cofco’s chairman to join the board of directors of Smithfield Foods.
