The idea that corn exports to China will decline as a result of last week's merger between Smithfield and China's Shuanghui International (Shineway) isn't likely to come to fruition, the U.S. Grains Council and National Corn Growers say.
Speculation that pork exports to China will increase in coming years is unlikely to hold off China's expected future corn import program, explains Dr. Bryan Lohmar, U.S. Grains Council director in China.
"Let's say Shineway seeks to increase U.S. pork to China by 1 million metric tons per year," Lohmar said. "Even if it does somehow manage to increase production and meet such an ambitious export target, that much additional imported pork would displace only 118 to 138 million bushels of corn demand in China, or less than two percent of China's total corn demand."
Lohmar says considering the USDA forecast of nearly 787 million bushels of corn exports annually over the next 10 years, even at a large hypothesized increase, pork exports would reduce imports by less than 20%.
Additionally, Lohmar says physical and political issues will act as a barrier to huge exports. Currently, Smithfields total U.S. pork production is estimated at just over 2 million tons last year.
"Expanding production by an amount significant enough to put a sizeable dent in China's corn import program would require enormous growth. This growth would take time, require new facilities, and would almost certainly be faced with environmental and other interests that are already challenging the expansion of large swine operations in the United States," Lohmar notes.
He pointed out that Shineway isn't the only player in the Chinese game, and other processors have an interest in the growing pork industry.
Lohmar adds that just as the company announced in its initial statement, Shineway is likely interested in improving production practices and management of integrated operations through the merger.
Access to Smithfield's modern pork production practices, genetics and technologies is also a major benefit. Together, these benefits could easily justify the price Shineway is paying for Smithfield, he says.