Question

Please give a brief dicussion on :

Pork Production and Consumption in Mainland China

The topic should include few points realted to -
Shuanghui has run a successful pork business and its net income always grew at a two digit rate. Why does Shuanghui need to acquire Smithfield when it is already doing well in China? The pork business of Smithfield still earns acceptable profits and operates on a sustainable basis. Why does Smithfield need to sell itself to Shuanghui? Answers to these two questions partly lie in the status quo of pork production and consumption in China and the United States.

Answer 1

Shuanghi is the chin's largest Pork producer company, has acquired Smithfield the largest U S pork producer company for $7.1 billion. which is so far the largest acquisition of the US firm by the Chinese company. This acquisition will help to increase the ability to supply china market. Per-capita consumption of the pork in china was recently it was about to 85.3 pounds where as the US is 59.3 pounds. when you factor the differences based on the population in these country 1.344 billion vs 314 million we can say the demand for the pork in China is six times more than that of the US. In 2012, the number of hogs slaughtered by the Smithfield which has about quarter of the US. Shuanghi will be able to source more of its port from Smithfield efficient, modern and safe pig farms and with good processing facilities. US pork farming is a consolidated modern industry, 87 percent of the pork's sold in the US markets are produced in a big farms with more than 2000 hogs. These forms are self contained to minimize the spreading of the diseases and climate controlled. but the Chinese farms are small scale, uses low technologies, fragmented. 70 % of the pork sold in the china were produced in a small farm with 500 hogs. The far sighted Chinese entrepreneurs totally understand that, because the pollution has included in the major part of the China's food chain, their next profit opportunities will be lie in acquiring the food production companies in abroad countries. Acquiring the Smithfield not only helps Chines company in getting more hogs, high ended pork production technology or even premium brand but also they will get the access for US safe farmland and the clean water. Based on the Chinese data , more than its 2/3rd of water supply is polluted in China. Cleaning up the water and farmland will need heavy metal and other carcinogens, it requires more money and also it is time consuming.

Now why does Smithfield has sell itself to Shuanghi, This take over will give Smithfield to entry in to the Chinese market, The biggest and fastest growing market. The demand has risen because of the China's domestic pig farmer's scandal with thousands of dead pig found in the Chinese river, Because of disease outbreak and illness. This acquisition provides the Smithfeild an opportunity to expand its offering product into China Through the Shuanghui's network. China's pork production market has multiple bouts of issues and diseases about food safety and other concerns. They don't have food production system like US has.