• By Lynda Kiernan

Smithfield Foods Acquires U.S. Grain Infrastructure

In a move to expand its grain operations, Smithfield Foods, the largest pork processor and hog producer in the world, announced that it has agreed to acquire grain facilities in Harpster and Morral, Ohio.

The two buying stations will be folded into SmithfieldGro, the company’s existing fertilizer optimization program that is a collaboration with the Environmental Defense Fund (EDF). The program was launched as a vehicle through which to provide agronomy resources and tools to farmers that will support the optimization of fertilizer use and improve soil health while helping Smithfield achieve its goal of sourcing 75 percent of its grain from sustainable sources by 2018.

All grain purchased through the Harpster facility will be used to feed hogs in Smithfield’s Eastern Hog Production Division, while the soybeans bought through the Morral site will be loaded on location and shipped to global buyers according to a company statement.

China Behind the Scenes

On September 26, 2013 China’s Shuanghui International Holdings Ltd. (later to change its name to WH Group) acquired the Virginia-based Smithfield for $4.7 billion creating a global behemoth with annual revenue topping $20 billion. The company had immediate plans to increase pork exports from the U.S. – including new premium pork products made specifically for China’s growing middle class.

Within recent years, realizing that self-sufficiency in food production was not a viable option, China began shifting its strategy toward securing food and grain through global mergers and acquisitions as it once did for fuel and mines.

China has 21 percent of the world’s population and only 9 percent of the world’s arable land, and in order to feed its growing population the country will need approximately half of the total global beef and wheat output to meet demand. In 2013, Chinese and Hong Kong-listed companies spent $12.3 billion on overseas takeovers and investments in agriculture, food, and beverages – a trend that would only keep growing.

Securing grain has been a common driver behind some of the largest food and agriculture deals pursued by Chinese companies – particularly to supply feed for animal protein production, the most prominent being the deals completed by COFCO to acquire Nidera and Noble Group.

Which Brings Us Back to Smithfield

The acquisition of Smithfield and the expansion of its grain operations speaks directly to the shift by China’s feed and livestock companies, which are increasingly looking at overseas animal protein production where cost of production is lower and raw materials are more accessible, according to World Grain.

The enormous scale of output and demand is reflected in a statement made by Robbie Montgomery, Grain Origination Manager for Smithfield Grain, who said in a company statement, “We’re now able to help feed nine million of our hogs in North Carolina with grain we source directly from Ohio farmers. With this purchase, we will have the opportunity to make positive impacts to our product quality as well as our environmental footprint by collaborating directly with more farmers.”

Contribute an article

Lynda Kiernan is Editor with HighQuest Group Media and of the Oilseed & Grain News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@highquestgroup.com.

©2017 HighQuest Group. All rights reserved.

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