by Agrimoney.com
The continued growth in US corn exports to China will see only minimal impact from the recent takeover of Smithfield Foods by Hong Kong-based Shuanghui International, according to the US Grains Council.
"Considering USDA forecasts nearly 20m tonnes 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," suggests Dr. Bryan Lohmar, USGC director in China.
China's consumption of corn has grown steadily in recent years, increasing some 37% over the past decade to total 176bn tonnes in the 2010/11 season according to USDA estimates.
Imports of corn have also grown in recent years with purchases totalling 1.52m tonnes in the 2009/10 season and increasing to 5.35m tonnes in the 2011/12 season.
"Expanding production by an amount significant enough to put a sizeable dent in China's corn import program would require enormous growth, suggest Dr Lohmar.
Pork export growth 'difficult'
If agreed, the deal between Shuanghui's and Smithfield earlier this week will create the largest hog and pork producer in the world, and has prompted speculation as to US pork export levels to China.
The deal will offer Shuanghui a chance to tap directly into US pork exports which, like many other foreign foods, are prized by Chinese customers concerned over the safety of some domestic products.
However, the US Grain Council suggests it will be extremely difficult for Shuanghui to significantly increase US pork exports to China simply through its control of Smithfield.
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, noted the USGC.
"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."
The USGC suggest Shuanghui is more interested in improving both its production practices and also improving management of its integrated pork operations.
'Learning how Smithfield successfully accomplished this in the United States and other countries is likely the main benefit'.
Hurdles
Reaction to Shuanghui's $7.1bn deal for Smithfield Foods has led to mixed reaction, both as to the implications for the pork market, but also feedstuffs.
The deal itself, which would form the world's biggest hog producer, faces regulatory hurdles.
Smithfield faces pressure from its main shareholder, Continental Grain, to boost shareholder returns.
Continental Grain has suggested a break-up of Smithfield, rather than a sale of the whole group.
In addition under the terms of its deal, Smithfield still has a month continue talks other suitors, which include Bangkok-based Charoen Pokphand Foods and Sao Paulo-based JBS SA.
Shares in Smithfield Foods stood at $32.74 per share ahead of the US opening.
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