As I noted in last week’s Victual Reality, the company recently announced a deal to sell 60 million pounds of pork to China. Since then, Smithfield has revealed details about how it will fill that order: by ramping up production at a slaughter facility in Sioux City, Iowa, hometown of one of the nation’s most ambitious local-food initiatives.
The [Sioux City] plant will begin processing an additional 3,200 hogs a day next week, or about half of a normal production shift, [a Smithfield spokesperson] said. Also, the plant will add about 250 workers.
Wow — an extra 3,200 hogs per day; just like that, as if it were no big deal. You don’t have to be a PETA-style vegan to marvel at the carnage. Since I didn’t get the chance to dig very deeply in to the China sale in Victual Reality, now’s my chance.
One remarkable thing about the Smithfield-China deal is that it’s rather small, by the standards of the world’s largest hog producer and pork processor.
Sixty million pounds of pork? According to Motley Fool, Smithfield annually churns out some 3.1 billion pounds of "the other white meat" in fresh form — and another 2.9 billion pounds of processed product (i.e., sausage, etc.).
However, Wall Street is betting that Smithfield’s deal could be the start of a long and profitable relationship between the world’s largest pork company and the world’s most populous nation. That’s why rumors of the China sale pushed Smithfield shares up 7 percent last month.
First of all, the China market is the great prize of hog producers. According to the USDA (PDF), China alone accounts for more than half of global pork consumption. Indeed, China as a whole consumes some six times more pork than the world’s next-most ravenous pork-eating nation, our own United States.
And, as Lester Brown never tires of reminding us, Chinese demand for pork is rising. The above-linked USDA report shows Chinese pork consumption surging 22 percent between 2002 and 2006; U.S. consumption held steady over that period.
Meanwhile, China has tried to satisfy surging demand by employing the U.S. model: consolidating and industrializing meat production. As one hog-industry site puts it:
China’s hog industry is "rapidly consolidating" on a scale similar to that in the U.S. … This includes the segmentation of farrowing and finishing, with 500- to 1,000-head sow barns and "routine off-site finishing" popping up around Chinese cities.
However, this effort has hit a major wall: a massive disease outbreak. Chinese hog producers are discovering that confinement-style livestock production provides an ideal atmosphere for disease: stressed animals with weakened immune systems, conveniently packed together.
Evidently, a malady called blue-ear virus, first found in U.S. hog confinements in 1987, is raging through China’s feedlots, mutating to forms unseen before. Chinese scientists are frantically searching for a vaccine. Like their U.S. counterparts, China’s industrial hog growers are quickly finding that they need constant help from the pharmaceutical industry to keep their hogs alive until slaughter.
Last year, blue ear wiped out some one million hogs in China, and the government has not revealed the full extent of damage this year. However, pork prices in China are surging, which signals a serious ongoing problem.
So, you’ve got a nation with surging demand for pork, and a falling supply. That’s where Smithfield comes in. In a conference call just before the China deal was finalized, Smithfield CEO Larry Pope titillated Wall Street analysts by speculating that Blue Ear could wipe out as much as 20 percent of Chinese hog production — an amount roughly equal to total U.S. hog production.
If so, China represents a dramatic opportunity for U.S. companies like Smithfield. As one hog-industry observer put it, "If this scenario is true, the potential for further Chinese importation of pork is almost incomprehensible."
Even without blue ear, though, it looks like China and other "developing nations" are set to become more and more important target markets for U.S. industrial-food purveyors. The USDA recently released a major study called “Global Growth, Macroeconomic Change, and U.S. Agricultural Trade” (PDF, don’t dare download it unless you’re a real ag nerd), explaining why.
To summarize: Demand for food in the U.S. and Europe has essentially matured — that is, it’s growing at the same slow pace as population. In the "emerging market" nations of the global south, however, populations are rising more rapidly than in the post-industrial north, and in countries like China, Mexico, and India, a growing middle class is demanding more "high-value" food like meat.
"As a result," reports the USDA, "the share of U.S. [food] exports destined for emerging markets climbed from 30 percent during the early 1990s to 43 percent in 2006." Mexico and China have been particularly popular destinations of the fruits of the U.S. food industry: "These two countries now account for 25 percent of U.S. [food] exports — nearly triple their share in 1990."
For this reason, I foresee U.S. industrial meat production raging ahead no matter how successful PETA and other campaigners are at goading U.S. consumers to shun meat.
And here we come to the limits of campaigns based on individual responsibility. The real way to take on the meat industry is to agitate for political reforms that force Smithfield and its few meatpacking peers to pay up for their environmental messes, treat their workers fairly, and stop torturing their animals as a matter of course.
As I argued in Victual Reality, without the ability to abuse people, the landscape, and animals with impunity, the meat giants would likely wither away.
Addendum: An interesting footnote about Smithfield’s China deal. China would only agree to buy the pork if Smithfield would guarantee that it be free of ractopamine, an additive routinely found in U.S. hog rations.
I’m not sure why Chinese authorities strictly oppose ractopamine use; the U.S. hog industry loves it because it supersizes livestock, resulting in lots more lean, low-fat meat. (At risk of infuriating PETA types, I will add here that this obsession with lean meat, gained through careful genetics and additives like ractopamine, has utterly ruined the flavor and culinary value of conventional U.S. pork.)
[Use of] ractopamine has been … accompanied by … reports of effects on the behavior of the pigs, making them “hyperactive” and more susceptible to transport stress … At the end of the 4-week study, [ractopamine-treated pigs] had higher heart rates than control-fed pigs and higher levels of circulating stress hormones.