CALLING for the agreement announced last week that would culminate in Chinese investor Shuanghui International Holdings Inc. acquiring Smithfield Foods Inc. to be kept in perspective, economists Steve Meyer and Len Steiner said there are no real reasons to raise suspicions about the combination.
First, the acquisition would not change the structure of U.S. pork production and, therefore, would not impact the competitive landscape, they said in an edition of their "Daily Livestock Report." The top 10 hog producers and the top 10 pork packers would still be the top 10 producers and processors, they said.
The acquisition would not change concentration levels or remove any competitor from the marketplace, Meyer and Steiner said. There is no reason that antitrust regulations should come into play, and "we don't see" that the deal would pose a threat to national security, they added.
The combination of the two companies would not transfer U.S. technology to China, they said, noting that U.S. companies have been active in China for years to show Chinese pork producers how to adopt western technology. Growing and processing hogs in China doesn't involve a need to spy, they said.
Finally, Meyer and Steiner said, the combination should increase U.S. pork exports to China as Shuanghui would make shipments to China smoother — at least for Smithfield. If that happens, hog and pork prices would increase in the U.S., and producers would be able to expand, backfilling for the additional Smithfield pork that would be exported, they said.