The Senate Agriculture Committee held a hearing yesterday, entitled, “Smithfield and Beyond: Examining Foreign Purchases of American Food Companies” to evaluate the proposed purchase of Smithfield Foods by the Shuanghui Group, a Chinese-based conglomerate.  If finalized, this acquisition would be the largest purchase of a U.S. corporation by a Chinese company.

In advance of the hearing, a coalition of farm, rural, and consumer organizations delivered a letter to the Committee on Foreign Investment in the United States (CFIUS), the Committee tasked with reviewing transactions that could result in control of a US business by a foreign person to determine the effect of the transaction on national security.  The letter urges CFIUS to reject the proposed purchase due to the considerable risks including threatening US security interests, undermining food security and the safety of the US food supply, and transferring technology, assets, and intellectual property that was developed in part by US taxpayer-funded grants.

The witnesses who testified were:

• Larry Pope, President and CEO of Smithfield Foods
• Matthew Slaughter, Associate Dean for Faculty, Signal Companies’ Professor of Management, Faculty Director of the Center for Global Business and Government, Tuck School of Business, Dartmouth College
• Dr. Usha Haley, Professor and Director, Robbins Center for Global Business and Strategy, West Virginia University
• Daniel Slane, Commissioner, US-China Economic Security Review Commission, US Chamber of Commerce

Chairwoman Debbie Stabenow (D-MI) and Ranking Member Thad Cochran (R-MS) and other Committee members asked a range of questions to the witnesses on issues ranging from food safety, national security, import and export balances, to intellectual property protection.

Both Stabenow and Cochran commenced the hearing with opening statements on the importance of that nation’s food supply to national security and framed concerns around the long-term impacts the acquisition may have on consumer prices, capacity to export pork by producers other than Smithfield, and the precedence this acquisition would set.

Pope, an employee of Smithfield for 30 years, defended against questions on how the sale would impact Smithfield, what he personally stands to gain from the sale, and how the sale would impact jobs in the US.  According to him, this is great for Smithfield and will not impact the Smithfield brand, management, or employees.

The Committee, as well as the witnesses, presented many theories on the motivations of the Chinese conglomerate to purchase Smithfield.  Commissioner Slane stated that Shuanghui was motivated by Smithfield’s valued technology in hog genetics and manure management and meat processing technology, and views this as the first of many forays into rural America by China.  Slane also indicated that China, with its high demand for pork, wanted to gain some control over pork pricing.  Dr. Haley stated that Shuanghai wanted to buy Smithfield for branding to assuage food safety violations.

Meanwhile, Smithfield Foods is currently evaluating nuisance complaints by roughly 600 residents in Wake County, NC who say the storage of hog waste in lagoons and the application of manure on adjoining land is depriving them of the use and enjoyment of their property.  Under state law, the complaints trigger a mediation process.  If that process fails, the mediation process may lead to lawsuits.