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Caution Urged in Shuanghui's Smithfield Deal

27 June 2013

CHINA & US - While China's Shuanghui International Holdings Limited is getting $7.9 billion in financing for its acquisition of the world's largest pork processor - US-based Smithfield Foods - there are growing concerns about differing food safety standards between the US and China, especially over the use of ractopamine.

Ractopamine is an additive fed to US-raised swine to produce leaner meat. It is commonly used in the US but has been banned in much of the rest of the world, including the EU, Russian and China, the world's largest consumer of pork.

Earlier this year, Chinese authorities began to require verification that pork imports from the US had no traces of ractopamine.

However, Virginia-based Smithfield was well prepared to meet the challenge. Two of its plants, which combined process more than 43,000 hogs a day, have already been ractopamine-free for a while, according to Smithfield CEO Larry Pope. In addition, a third ractopamine-free plant will be completed this month, bringing to half the pork giant's total production that is off the additive.

Joe Schuele, a spokesman for the US Meat Export Federation, said ractopamine use is recognized as safe by the US Food and Drug Administration. Most trading partners accept US pork under internationally accepted guidelines for ractopamine residue.

"But if individual companies see an advantage in shifting more production toward the ractopamine-free category, that is their decision to make," Mr Schuele said.

Last year, China was the third-largest export market for US pork producers, after Japan and Mexico. About 355,187 metric tons of US pork was exported to China in 2012, valued at $704 million, according to USFEM.

Shuanghui's chairman Wan Long said the acquisition will help meet the growing demand in China for pork by importing high-quality meat products from the US.

"Whenever a change in company ownership takes place, the economic fundamentals of the US pork industry do not change," Schuele said. "Smithfield's plants still operate under the USDA regulatory system and will still be authorized to serve the domestic US market and the same range of foreign markets that they serve today."

The deal is now waiting for approval from Smithfield shareholders and US regulators.

"I applaud China's success in having contact only with major US pork producers who are not using the drug ractopamine," said Michael W. Fox, a veterinarian and animal-rights activist in the United States.

Fox hopes that the takeover of Smithfield will have a ripple effect through the US pork industry and lead to a nationwide ban on ractopamine, "not simply to get into the export to China market, but for ethical, humane reasons, which should not be sacrificed for short term profits", he said.

Shuanghui's chairman Wan said he expects the deal to grow the combined company as a leading global pork and processed meat producer with the same vision and values of providing high-quality and safe products to consumers, but China's largest meat processor has already drawn criticism from some US food experts and lawmakers for its poor food safety record.

More US senators raised concerns about a Chinese company's plan to buy Smithfield on Friday, as reported by Reuters.

However, Jiang Honglin, an animal science professor at Virginia Tech, has no concerns about the food quality after the takeover.

"A change of ownership will not change the fact that every product from Smithfield still must meet the food safety standards in the US," he said.

Meanwhile, some Chinese worry that the Smithfield deal might relax the country's ractopomine ban.

Two years ago, Shuanghui was embroiled in a food-safety scandal and apologized on its website after China Central Television reported the company purchased pigs fed with feed containing clenbuterol, a chemical that also prevents accumulation of fat.

TheMeatSite News Desk

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