Smithfield Foods Inc. (SFD) announced that it has got into a Memorandum of Understanding with China’s Dandong Port Group to explore business opportunities in Northern China. The deal was formalized during Governor Bob McDonnell’s recent visit to Asia with a trade and economic development mission.
The two companies will together hatch out new methods to boost business in China through extensive exchange of information and market studies thereby maximizing the assets of both the companies.
The MOU represents a commitment on the part of both the parties to explore opportunities for having a stronger partnership in trade with the goal to create new success stories.
Although not very strongly, the deal could augment Smithfield’s efforts to further penetrate the growing pork market in China, already the world’s largest pork consumer. As per the data collected by U.S. Meat Export Federation, China imported $45.2 million worth of U.S. pork during the first quarter of 2011, making it the fifth-largest destination for U.S. pork exports.
Smithfield’s entry into China dates back to 2007, when the Virginia based retail giant had signed an agreement with a major Chinese trading company for the purchase of 60 million pounds of Paylean-free pork.
Chinahad banned pork imports from the United States in April 2009 following the outbreak of swine flu. The country had delisted eleven U.S. pork plants being skeptical about the trace levels of Paylean, which had been found responsible for causing swine in 24 countries.
The ban, which lasted more than a year, slashed U.S. pork exports to China in 2009 by about 40%. In May 2010, the country begun buying U.S. pork again, but restricted to the internal organs and other parts that suit the Eastern palate.
Dandong Port Group Co. is a holding company based in Hong Kong with port and infrastructure assets throughout North Asia, including the Port of Dandong, which is located in the Liaoning province.
Smithfieldis the leading processor and marketer of fresh pork and processed meats in the United States. However, the protein industry is highly competitive. The company’s products compete with a large number of other protein sources, including chicken, beef and seafood, but the primary competition comes from other pork processors.
Smithfield currently holds a Zacks #3 Rank which implies a short-term Hold rating.
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