Three Words: Strategic Pork Reserve

Over at Grist, Tom Philpott breaks down this Reuters report on Smithfield’s plans to sell pork to China. Last month, the company announced it had cut a deal to sell 60 million pounds of pork to a Chinese firm, and recently it disclosed it would increase production at its Sioux City, Iowa, location by 3,200 hogs a day. The Grinder has highlighted Smithfield’s international ambitions before, and China’s a tempting market for all the obvious reasons.

But there’s an additional incentive for Smithfield: Pigs across China have been dying from what’s thought to be blue ear pig disease, a vicious virus that has decimated pig farms over the last year. (And the virus has now spread to Vietnam and Burma.) As detailed in a lengthy account in the Washington Post, China is withholding tissue samples from international researchers, which is preventing positive identification of the disease, and regional officials are lowballing estimates of the death toll.

Prices have been rising—pork’s up 87 percent in the last year, according to the Post—and last week the Chinese government, attempting to placate its citizens, announced that it was releasing “30,000 tons of live pigs from its central reserves.” Yes, there are central pork reserves (live and frozen) in China, where the population, more of whom can afford pork than ever before, is as addicted to it as Americans are to oil (hence our strategic reserve).

You wonder if government officials have been briefed on the connection between high bread prices and the French Revolution. As the Financial Times observes (registration required), the rising pork prices are already sparking student protests, and the government is seriously worried about deeper discontent. (The Times story also includes this quote from James Rice, the China country manager for Tyson Foods, on the pork reserve: “They describe it as though they have pigs buried underground, like oil in wells. It is not really a true reserve.”)

Back to Smithfield. According to the Motley Fool, the company’s deal with China isn’t as large as it looks: 60 million pounds is less than 2 percent of Smithfield’s fresh pork sales last year. But this is just the beginning, Philpott suspects. China’s pork consumption is “the great prize of hog producers,” he writes, and Smithfield’s CEO even recently speculated that “Blue Ear could wipe out as much as 20 percent of Chinese hog production—an amount roughly equal to total U.S. hog production.”