Big week saw a major protein purchase by the Chinese and improvements in the outlook for crops and beef exports.
The $7.1 billion purchaseof Smithfield Foods by a Chinese company was announced this week. Shareholders will receive a premium of more than 30% over the last trading, and industry experts seem to agree that the deal is a good one for both Smithfield Foods and China’s Henan Shuanghui, the Chinese meat processing firm. You can read more about the deal and its ramifications here and here.
Smithfield was being pressured by shareholders to re-evaluate its integrated pork production model; the purchase of Smithfield is expected to alleviate that pressure at least in the short term. U.S. investors may not love the U.S. protein market, but the rest of the world does. Brazil, Mexico and the Pacific Rim have been the most aggressive in acquiring U.S. protein companies.
The World Organization for Animal Health(OIE) has voted officially to designate the U.S. as a country whose risk for the spread of BSE is negligible. “Negligible risk” is OIE’s lowest risk classification under the OIE animal health code. Countries with this status are recognized as having implemented robust BSE controls and done extensive surveillance of their herds to demonstrate this extremely low risk level.
Phil Seng, president and CEO of the U.S. Meat Export Federation, says the new designation should remove any legitimate hurdles that U.S. beef has faced in the global market due to BSE. “This decision by the OIE should clear away any remaining concerns that some countries have about the risk associated with importing beef and beef products from the U.S. We think the decision announced by the OIE today should provide a number of beef-importing countries with a reason to reevaluate their requirements for beef imports from the U.S.,” Seng said this week.
• Meanwhile, corn plantingpulled closer to the five-year average last week, as of May 26. At that time, USDA reported that 86% of the crop had been planted compared to the 90% average for 2008-2002. At this time last year, corn planting was complete.
USDA’s weekly Crop Progress report indicates that both soybean and corn planting remain well behind schedule, however, and are both roughly at the level of 1993. After planting 43% of corn acres the week of May 19, heavy rainfall in many parts of the Corn Belt reduced planted acres to only a further 15%. Read more here.
With the crop mostly in the ground, the focus now shifts to satisfactory growing conditions over the next eight weeks.