Shuanghui International Holdings buys U.S. Smithfield Foods for $4.7bn

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Shuanghui International Holdings buys U.S. Smithfield Foods for $4.7bn

Tastylia Portugal As China’s growing population continues to put pressure on the country’s natural resources, the world superpower is looking to foreign investment to solve the problem of issues such as food production and farming.

source url One problem China is facing is keeping up with the country’s demand for meat.

Over a quarter of the meat produced worldwide is eaten in China – 64.5 million tonnes to be exact. To satiate the country’s growing appetite (quite literally), the Chinese corporation Shuanghui International recently purchased US-based Smithfield Foods, the world’s largest pork producer, for $4.7 billion in cash. The deal is still undergoing processing by the US Treasury Department’s Committee on Foreign Investment, but looks to set precedent when it closes later this year as it will be the largest takeover of a US company by a Chinese firm.

Shuanghui International is already the majority shareholder of China’s own largest meat producer, but the deal says as much about the future of China’s interest in the global food system and foreign investment as it does about pork. In a report released in 2011 by the Chinese Institute for Agriculture and Trade Policy, it was revealed that the government had been trying to sustain self-sufficiency in pork production as consumer demand swelled. In purchasing Smithfield, the government is showing a change in direction that affirms offshore production is the way forward for China.

As the country expands its interests overseas, there are numerous opportunities available for Australian businesses, too.

A new era of opportunity for Australian farmers

Reports surfaced last week that China and Australia are looking to align their interests, providing great opportunities for savvy Australian farmers.

The plans include developing arable land in the as-yet-untapped north of Australia, as well as the investment of Chinese companies directly into northern farms focused on producing sheep, sugar, dairy and beef. According to the Australian Financial Review, Canberra and Beijing have been studying potential partnership avenues since May 2012, and will be publishing a report on the findings in upcoming weeks.

Foreign investment into the food production sector is not a new phenomenon, but the shift towards farming and specifically meat production is. While foreign firms have invested in roughly half of Australia’s other primary food sectors such as wheat and dairy, a recent government study showed that only 11 per cent of Australian farmland was owned by offshore investors. While this percentage hasn’t changed much over the past 30 years, China’s increased meat consumption – and readiness to invest big bucks overseas to meet consumer demand – suggests now could be a prime time for this number to rise.

The joint China/Australia plans could prove lucrative for Australian farming businesses, as they would not involve selling any farmland or resources, or importing labour. According to Australian Trade Minister Craig Emerson, the plan “is designed to lift Australian food production for world markets.”

If the Smithfield acquisition is anything to go by, now could be the prime time for Australian farmers to look at maximizing foreign investment potential.

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