Ag Policy Blog

A number of food, rural and consumer groups are urging the U.S. Committee on Foreign Investment to reject a proposed acquisition of Smithfield Foods by the Chinese company Shuanghui International Holdings, Ltd., outlining in a 12-page letter to Obama administration cabinet secretaries Tuesday the potential risks involved in such an acquisition.

"The proposed takeover of a major U.S. food manufacturer poses significant potential threats to U.S. security interests; undermines food security in the United States and worldwide; threatens the safety of the U.S. food supply; transfers technology, assets and intellectual property that was developed in part by taxpayer-financed resources to a foreign company; and accelerates the international consolidation of the food and agribusiness industry to the detriment of American farmers, rural communities, the environment and consumers," the letter states.

The letter is signed by the following groups: Campaign for Contract Agriculture Reform; Coalition for a Prosperous America; Center for Rural Affairs; Contract Poultry Growers Association of the Virginias; Food & Water Watch; Iowa Citizens for Community Improvement; Land Stewardship Project; Missouri's Best Beef Co-Operative; Missouri Farmers Union; Missouri Rural Crisis Center; National Family Farm Coalition; National Farmers Union; Nebraska Farmers Union; Organization for Competitive Markets; Rural Advancement Foundation International—USA; R-CALF USA; and Western Organization of Resource Councils.

The groups raise a number of concerns including what the acquisition could mean for food security, national security, food prices, food safety, and meat exports from China to the U.S.

"A cross-border acquisition of this scale would have tremendous impacts on the U.S. food supply," the letter said.

"This purchase has traditional national security implications (such as the legitimate risk of espionage from Smithfield's plants and property), but it also has broader security implications for the U.S. economy," the letter said.

"The purchase has the potential to disrupt the critical infrastructure and systems of the U.S. food supply, agricultural land and rural economies.

"In the simplest terms, Smithfield is a significant supplier of pork products to U.S. military installations. If the merger were approved by CFIUS, the Chinese-owned Smithfield would control a portion of the food supplied to U.S. troops. The law requires CFIUS to take into account the potential impact on domestic production to meet domestic military requirements. Smithfield has contracts to provide $12.5 million worth of pork to U.S. military facilities. The Shuanghui purchase could potentially disrupt the supply of food to U.S. military facilities, either deliberately or because a higher percentage of Smithfield’s processing output was diverted to exports.

"The CFIUS review should further consider whether Smithfield's military customers transmit classified or sensitive material, such as the delivery addresses for secure military facilities when making purchases. But CFIUS should also consider the broader impact on food security. The law gives CFIUS wide latitude to consider cross-border purchases that deliver 'the control of domestic industries and commercial activity by foreign citizens as it affects the capability and capacity of the United States.'

"The proposed purchase threatens the integrity, security and safety of the U.S. food supply and should be prohibited."

The groups expressed concern that the acquisition could lead to the increased export of more Smithfield pork supplies and an increase in U.S. retail pork prices.

According to the letter Smithfield exported 1.2 billion pounds of pork in 2012, or 18% of its total production.

"Smithfield has shifted half of its pork production and processing to ractopomine-free pork, which many observers believe was designed to court Chinese buyers since China will not import pork raised with ractopomine," the letter said.

"If Shuanghui diverts fully half of Smithfield's production to export to the Chinese market, the exports from U.S. plants would increase by about two billion pounds.

"While it is difficult to precisely estimate the impact this shift would have on consumer prices, this could significantly increase the retail price of pork in the United States.

Read the letter here, http://tinyurl.com/….

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