Can Smithfield meet Chinese demand without driving up U.S. prices?
September 29, 2013|By Ryan Murphy, firstname.lastname@example.org It's official: Smithfield Foods now belongs to Chinese pork giant Shuanghui International Holdings. The sale was approved by an overwhelming majority of shareholders on Tuesday, and with it came access to the burgeoning Chinese pork markets that Smithfield executives had been heralding as huge new source of potential profit. That raises two questions: Now that Smithfield has access, does it have the capacity to meet the demand? And will satisfying the Chinese demand increase the price of a ham in an American supermarket? Smithfield Foods chief executive Larry Pope told the Daily Press in June that the merger could temporarily increase the price of pork products in the U.S., but said farmers and processors would ramp up production and prices would settle over time. U.S. farmers would benefit from the increased demand for their products, he said. Smithfield owns 400 hog farms and contracts with 2,000 more. It employs more than 46,000 people internationally, 3,700 in Virginia. In a report to stockholders last year, Smithfield said its hog farms produce 15.8 million hogs annually. The pork segment of the company processed 27.7 million hogs in fiscal year 2012, the report said, and exports made up 18 percent of the company's pork sales for that year. The report said the total capacity of Smithfield's processing plants is about 110,000 hogs per day, or about 40 million each year. It would seem the infrastructure is in place to boost production. According to the U.S. Bureau of Labor and Statistics' Consumer Price Index, pork products in America have held fairly steady over the last year. Pork prices overall increased 1.7 percent between August 2012 and August 2013, led by an 8.2 percent increase in bacon and related