That all started changing over 30 years ago. The first beneficiaries of moving to a mixed economy under Deng Xiao Ping were the farmers, who have long-term land use rights (30 year) and decide what to grow. They also can sub-lease land out to developers or large-scale farming groups for profit One look at the new houses they built and you'd understand.
C&NW, CA&E, MILW, CGW and IC fan
Murphy Siding Wouldn't it be more cost effective to ship the grain to China, and do the hog raising and pork processing there?
Wouldn't it be more cost effective to ship the grain to China, and do the hog raising and pork processing there?
To take that course of action may drive up your total costs. The reason is something called the feed conversion ratio of animals raised for food. It is an expression of how many pounds of feed are required to obtain a pound of gain in animal weight. Obviously, the ratio varies with the quality of the feed, but as a generalization it is around 3 to 1 for corn fed pork. Moreover, that is measuring the total weight gain of the animal, not the chops, roasts or belly portions that are most in demand.
Some offset of that disadvantage occurs in the corn shipment requiring much less stringent shipping methods, but the history of the packing industry in the past half century has been one of moving the plants closer to the producer. That logic applies to raising the animal close to the source of the feed.
China, like the former Soviet Union has a basic infrastructure problem in agriculture. The farmers do not own the land. They do not own the means of production. Where is the profit for the farmer.
In the USA, Ag is big business with small people (for the most part). The farmer owns his land, he owns his machines, he must borrow the money to grow the crops, and he gets paid once a year.
In China the State owns the land, the machines, and to some extent the farmers them selves. There is little incentive to produce, and things are awkward to say the least. People leave the rural areas for the cities where they can find jobs, not at all unlike the USA in the '30s. But in the USA, those who as remained on the farms owned the land and the equipment. We do have farm subsidies and that is a mixed blessing/curse, but if the farmers make money, and the people in the cities can afford to eat, then I suppose that it is working. Is it working in China? That is yet to be seen.
In the meanwhile, China holds many US Dollars, and there is no better place to use them than in the US. The Japanese got stung big time playing that game. Maybe China can do it better, maybe they cannot, but China is in many ways a perfect fit with the US economy.
So put that on your train and run it out to the west coast.
ROAR
The Route of the Broadway Lion The Largest Subway Layout in North Dakota.
Here there be cats. LIONS with CAMERAS
daveklepperAs a Rabbinical student in an Orthodox Yeshiva, I simply wish to point out that any food container, regardless of what it has been previously used for, can be made Kosher by thorough cleaning under the supervision of a qualified Rabbi.
Dave,
Like Greyhounds, I too appreciate your explanation of how items used in food handling may be made Kosher. But I am a little confused and I hope you will take a follow up question.
In a previous post the point was make that a Kosher household must have two separate dishpans, one for meat dishes and one for milk dishes as well as two separate sets of cookware for cooking meat and milk dishes. Yet when it comes to commercial situations, it seems one set of implements and containers will do and this is true even when switching from pork to kosher products. As I understand it, a refrigerator car may be used to ship pig carcasses, throughly cleaned under the supervision of a qualified Rabbi, and then used to ship Kosher beef.
So why can't a housewife simply wash her meat dishes, throughly clean her dishpan and then use it for her milk dishes? Or am I missing something?
John
Bucyrus,
I think you are close but suggest that what the purchaser is buying in addition to a more secure supply is expertise that they can use to modernize their own production processes.
I doubt that "the public" will stay away from Smithfield products because they are Chinese owned. Six months after the deal is over and out of the news I suspect less than 5% of the population will remember Chinese ownership, and that less than 5% of that 5% would tell you two Smithfield brands other than Smithfield.
To the extent that more pork goes to China as a result of this deal than would otherwise have been the case, pork prices should edge up a bit. That should coax more production out of the industry which will tend to depress prices. On balance I expect no price impact as most likely result, with very modest price increase the other reasonably likely result. Either will probably be swamped by routine volatility and our idiot ethanol policy.
Mac
Speaking only in terms of business and marketing:
*
For the time being, China’s weak link in pork production does seem to be the agricultural sector, while their manufacturing sector is more cost effective than ours with many products. But I don’t see any reason why they cannot bring their ag sector up to the same level of competitiveness as ours, given some time. Their only limitation is that they can’t keep up with their tremendous economic growth.
So, if China has the competitive advantage in almost everything, why do they want to buy a U.S. pork producer? Why not just buy the pork? They have the money for the pork. Why do they need a U.S. pork producer? Well one reason could be that they have the competitive advantage in pork production, and they plan to become the world’s biggest pork exporter just like they export everything else. The only problem is that their food production has a black eye. Their poor quality is legendary, and food is personal. Would you eat pork imported from Shuanghui in China? That is the only obstacle to China being the biggest pork producer/exporter.
So, what they are buying is not a new source of pork. What they are buying is the Smithfield brand. I am referring to the brand reputation, and not just the name and logo. Once, they buy Smithfield, the company will be a Chinese pork supplier, except it just won’t be based in China. But even though the company will be the same U.S. pork producer as it was under Smithfield, I suspect it will be stigmatized to a large extent in the eyes of the U.S. market.
It will be very similar to the stigma of shipping kosher food in a container that once shipped pork, as was previously brought up here. Nevertheless, some portion of the U.S. pork market will be retained. And the rest of that market will probably return once it gets used to the idea of a Chinese pork producer that is in the U.S., and seems to not be causing any health problems.
But pretty soon, there will be pork going in both directions as the stigma against Chinese pork dissipates. That then opens the door to China becoming the world’s largest pork exporter with most of the pork being produced in China with their competitive advantage.
As it stands now, China cannot open that door to being the world’s largest animal protein provider because their food production reputation stands in the way. Acquiring a company with a good reputation helps China repair their reputation. This may indeed by a win, win— for a while.
If China stops raising pigs, that should end the flu as we know it.
If this whole thing comes to fruitition as Greyhounds has broken it down, it may not only open up several opportunities on the intermodal front but I also can't help but wonder if it just may open up an opportunity for the railroads to move these hogs to slaughter to the North Carolina facility.
Moderator: What possible objectionn was there to the little green men story?
Would you ban Gulliver's Travels as something related to Englishmen?
Or Robinson Cruso. How about the Gilbert and Sullivan "Duke of Plaza Toro" anti-Spanish?
or "The Mikado"
Please restore it, its worth its chuckles.
thanks!
Murphy Siding Wouldn't it be more cost effective to ship the grain to China, and do the hog raising and pork processing there? We have a Smithfield owned pland here in town- John Morrell. About 20-25 years ago, the union meatcutters were making about $18 an hour. After some "labor unrest", the company basically got rid of the union. Starting wage now is in the $10 an hour range. Wouldn't $10 an hour be off the chart for a packing plant worker in China? There was discussion of how the hog business in this county is so efficient because it's run like a well oiled machine in a factory. Doesn't China have a lot of factory experience?
Wouldn't it be more cost effective to ship the grain to China, and do the hog raising and pork processing there? We have a Smithfield owned pland here in town- John Morrell. About 20-25 years ago, the union meatcutters were making about $18 an hour. After some "labor unrest", the company basically got rid of the union. Starting wage now is in the $10 an hour range. Wouldn't $10 an hour be off the chart for a packing plant worker in China? There was discussion of how the hog business in this county is so efficient because it's run like a well oiled machine in a factory. Doesn't China have a lot of factory experience?
They want more Sweet & Sour Pork and Pork fly lice!!
8 N' Sand
Murphy,
It isn’t just the processing/packing part; it’s the raising to market weight part in the volume required. China has a really hard time of this.
And oddly, it is cheaper to raise, slaughter, process, package then ship it from here to there, we are that efficient at it.
23 17 46 11
Thanks to Chris / CopCarSS for my avatar.
Hi Johnny! Oh certainly, I'm aware many languages use borrowed words when none of their own seem to work, such as in Japan "Rush Hour" for commuters is called "rushawa", "baseball" is "basuboru", and so on.
Juniatha turned me on to a German steam fan website called "Dampf-Freak", so apparantly the Germans don't have a word for "freak", as in extreme fan, that quite fits. I can't do much with the "Dampf-Freak" site except look at the pictures, my high school/ war movie German isn't quite up to the task!
The only exception I'm aware of is the French who'll twist their own language into knots to avoid using a word from anyone elses.
Wayne
Firelock76 daveklepper Ihit.just ranslated the question of Kosher food in freight cars and my answer to two of our really top students, and continued with your little green-men story. It was a 100% hit. Todah Rabbah, thanks a lot. And I larned that Alien in Hebrew is Alien, when refering to men from space, Mars or any more distant location. You're welcome Dave, I'm glad you and your friends enjoyed the joke but someone must have taken exception to it because it's GONE! Can't imagine why, it was a Jewish comedian, Soupy Sales as a matter of fact, who came up with it. I'm amazed the word for "alien" in Hebrew is "alien." I'm assuming it's a borrowed word. Wayne
daveklepper Ihit.just ranslated the question of Kosher food in freight cars and my answer to two of our really top students, and continued with your little green-men story. It was a 100% hit. Todah Rabbah, thanks a lot. And I larned that Alien in Hebrew is Alien, when refering to men from space, Mars or any more distant location.
Ihit.just ranslated the question of Kosher food in freight cars and my answer to two of our really top students, and continued with your little green-men story. It was a 100% hit. Todah Rabbah, thanks a lot.
And I larned that Alien in Hebrew is Alien, when refering to men from space, Mars or any more distant location.
You're welcome Dave, I'm glad you and your friends enjoyed the joke but someone must have taken exception to it because it's GONE! Can't imagine why, it was a Jewish comedian, Soupy Sales as a matter of fact, who came up with it.
I'm amazed the word for "alien" in Hebrew is "alien." I'm assuming it's a borrowed word.
No, I did not succeed in learning much more than how to pronouce words written in the Cyrillic alphabet; when I got to the declension of nouns I gave it up.
Johnny
The price here most likely will either remain as is or drop, as Smithville hinted in the article that US domestic pork production will likely have to increase.
For all of its industrial progress, agriculture in China, as in Japan too, remains almost completely a manual labor business, what we view as modern techniques, such as grain harvesters and combines simply aren’t there, even with the state sponsored co-ops, most domestic production of food stuff in China is from family farms and mom and pop operations.
I will try and find the magazine, (it’s at work on the break table, so it may be long gone) but the article mentioned that China imports something like 40% of its food…the Chinese domestic agriculture industry has suffered as many people from rural areas that were producing food stuff have moved to cities looking for better paying industrial and manufacturing jobs.
Sounds familiar, huh!
Trust me, while I am not involved in the production end, I am involved in the first stage delivery part, you would be astounded by how much food in the form of grain America sells, and often gives away overseas.
We have a dedicated train of solid boxcars full of bagged rice, corn, wheat, and lentil that runs twice a day, averages 50 plus boxcars, to an exporter for shipment overseas.
Never kid yourself; if the American farmer/rancher were allowed to control the domestic and export market instead of the government using our produce as a trading tool, we could feed the world cheaper than they could feed themselves, with enough left over to half your grocery bill!
Lee Iacocca pointed out in one of his books that the average rice farmer in Texas could grow, harvest, and package then deliver more nutritious rice to Japan at less than half the retail cost to the Japanese populace compared to Japan’s domestically produced rice simply because Japan’s domestic rice production is protected by a trade restriction on imported rice, which benefits the domestic growers, who are also small mom and pop farmers that rely on manual labor, hand planting and harvesting, to grow their rice.
Sounds funny, but we here in America pay less for rice than the Japanese, even though per person we consume less of it.
From what I read, someone in China had a basic capitalist light bulb moment…buy in volume at a wholesale price and sell in volume at a retail price without having to produce the basic product themselves.
Wal-Mart’s concept flipped, go figure.
I see no problem with the shipping model explained by Greyhounds. I think that would work to the benefit of U.S. shippers as long as the net export of pork to China is increased by this deal.
When I speak of branding, I am referring to the effects on the brands of Smithfield and Shuanghui induced by each other, on each other. I am not referring to the brand name per se, but rather the intangible brand capital. I believe that is what is so new and different about this acquisition.
The two brands may remain separate in actual practice, but in terns of brand capital, they will be linked by the ownership of Smithfield by Shuanghui, so they will probably merge and affect each other. I would speculate that there will be a big difference between the two brands independently when viewed by the U.S. market. So putting the two together will result in a brand far different than the Smithfield brand.
It is just my opinion, but if this deal is approved, I expect Smithfield to cease selling to the U.S. market, and export all of its pork production to China and perhaps other foreign countries.
jeffhergertSome observers cited in newspaper articles do fear that domestic consumers could end up paying more for pork because more of Smithfield's production going to China. Others expect Smithfield to expand production to meet expanded demand.
If a greater proportion of US pork went to China and the supply to the US were reduced I would expect that someone would began raising more pork for US consumption. There could be a short term price rise but over time I think it would even out. In a day when the US has a balance of trade problem I would think that selling more of anything to China would tend to benefit our economy.
I suppose the more we produce the more we must transport and that has implications for railroads. But it seems to me the railroad issue is relatively small here.
Kevin C. Smith Opening up new markets, especially the further you get from where you are, is not easy. You need places to position your product, get it known to wholesalers & retailers, set up supply and distribtion chains, etc. Finding a new supply of product for your market, especially the further you get from where you are, is not easy. You need to find enough production capacity, the right product, the right price and the right availability. In this scenario, a company looking to find more supply for its existing & future market found a company looking for markets for its existing and future supply. The "created chance" is putting these two together. The theory of any integrated production/distribution/sales system is that you can control the variables better for your costs and service. (The word for that is "logistics" and the most obvious example of it is "Wal-Mart".) There are other ways for each to obtain what they wanted (sales/marketing agreements, lots & lots of salesmanship, etc.) but this particular deal was what worked for these particular parties involved in this particular situation.
Opening up new markets, especially the further you get from where you are, is not easy. You need places to position your product, get it known to wholesalers & retailers, set up supply and distribtion chains, etc.
Finding a new supply of product for your market, especially the further you get from where you are, is not easy. You need to find enough production capacity, the right product, the right price and the right availability.
In this scenario, a company looking to find more supply for its existing & future market found a company looking for markets for its existing and future supply. The "created chance" is putting these two together. The theory of any integrated production/distribution/sales system is that you can control the variables better for your costs and service. (The word for that is "logistics" and the most obvious example of it is "Wal-Mart".) There are other ways for each to obtain what they wanted (sales/marketing agreements, lots & lots of salesmanship, etc.) but this particular deal was what worked for these particular parties involved in this particular situation.
Another big THANK YOU! I could not have said it this well myself.
According to Bloomberg Business Weekly, existing branding will remain, as will production facilities and methods, management will also remain in place.
The reason for the purchase was to lock in a supplier for the Chinese distributor, and it raised capitol for Smithville.
Bloomberg lists it as a win all the way around.
AgentKidedblysard Smithville has been exporting to a Chinese distributor for many many years, as has Tyson Foods with it chicken. Smithville offered itself for sale in a several billion dollar deal, the Chinese took it. If I had known this was a change to the financial arrangements of an existing operation I would not have posted such a negative opinion of it earlier. If the basics of this operation are already in place, then I think Greyhounds is onto a good plan. [my empahsis in blue]
edblysard Smithville has been exporting to a Chinese distributor for many many years, as has Tyson Foods with it chicken. Smithville offered itself for sale in a several billion dollar deal, the Chinese took it.
Smithville has been exporting to a Chinese distributor for many many years, as has Tyson Foods with it chicken.
Smithville offered itself for sale in a several billion dollar deal, the Chinese took it.
If I had known this was a change to the financial arrangements of an existing operation I would not have posted such a negative opinion of it earlier.
If the basics of this operation are already in place, then I think Greyhounds is onto a good plan.
[my empahsis in blue]
Changing the financial arrangement in this case, changes the existing operation. Smithfield selling product to China is a lot different than a Chinese pork producer buying Smithfield. This has the potential to have a major effect on branding. I am speaking strictly in terms of business.
If I had known this was a change to the financial arrangements of an existing operation I would not have posted such a negative opinion of it earlier. My comments were more directed toward the increasing unlikelihood of such events in the future. If the basics of this operation are already in place, then I think Greyhounds is onto a good plan.
Bruce
So shovel the coal, let this rattler roll.
"A Train is a Place Going Somewhere" CP Rail Public Timetable
"O. S. Irricana"
. . . __ . ______
Bucyrus Regarding this quote from the link: “Smithfield said the deal isn't about importing Chinese pork into the U.S. Instead, the company says it's a chance to export into new markets with its brands, such as Smithfield, Armour and Farmland.” I do understand that the deal isn’t about importing Chinese pork into the U.S. But why does the deal create a chance to export into new markets that is greater than the chance that currently exists? Will the purchase of Smithfield by China cause the price of Smithfield’s product to drop, thereby opening new markets due to the lowered price?
Regarding this quote from the link:
“Smithfield said the deal isn't about importing Chinese pork into the U.S. Instead, the company says it's a chance to export into new markets with its brands, such as Smithfield, Armour and Farmland.”
I do understand that the deal isn’t about importing Chinese pork into the U.S. But why does the deal create a chance to export into new markets that is greater than the chance that currently exists? Will the purchase of Smithfield by China cause the price of Smithfield’s product to drop, thereby opening new markets due to the lowered price?
It means that they will export pork AND profits.
Some observers cited in newspaper articles do fear that domestic consumers could end up paying more for pork because more of Smithfield's production going to China. Others expect Smithfield to expand production to meet expanded demand.
The impression I get is that the some Chinese businessmen want to bring more pork to China. Instead of buying the end product, they were able to buy the means of production. This allows them a better control of the supply and costs, and make a buck doing it. It may not help (nor hurt) the average American hog producer or pork consumer, but it helps out the Chinese businessmen who bought the company and the American businessmen who sold the company. If both parties to the sale are satisfied with the outcome, isn't that what unfettered capitalism is all about?
Jeff
Bucyrus I understand that the Chinese market for pork is undersupplied, so the acquisition of Smithfield would help offset the supply shortfall in China. I don’t know how the Chinese pork undersupply compares with the Smithfield production capability. If the deal is finalized, would Smithfield’s entire production go to China, or would Smithfield simply expand to serve both the U.S. and Chinese markets?
I understand that the Chinese market for pork is undersupplied, so the acquisition of Smithfield would help offset the supply shortfall in China. I don’t know how the Chinese pork undersupply compares with the Smithfield production capability.
If the deal is finalized, would Smithfield’s entire production go to China, or would Smithfield simply expand to serve both the U.S. and Chinese markets?
Smithfield is saying the deal will open up new export opportunities.
"Smithfield said the deal isn't about importing Chinese pork into the U.S. Instead, the company says it's a chance to export into new markets with its brands, such as Smithfield, Armour and Farmland.
Larry Pope, Smithfield's CEO, said in a conference call on Wednesday that the transaction "preserves the same old Smithfield, only with more opportunities and new markets and new frontiers."
'People have this belief ... that everything in America is made in China,' he said. 'Open your refrigerator door, look inside. Nothing in there is made in China because American agriculture is the most competitive and efficient in the world.'"
http://siouxcityjournal.com/business/china-s-shuanghui-in-b-deal-for-smithfield/article_b382e669-6eac-5a8e-a7c6-fdab179a4de2.html
Well, new export opportunities for pork can translate into more opportunities for railroad business.
US domestic demand for pork won't go down because pork exports increase. What should happen is an increase in US (and Canadian) pork production to meet the increased demand. That will be good for a whole lot of people from railroaders, to John Deere assembly line workers, to hog producers, to real estate agents and so on and so on.
daveklepper As a Rabbinical student in an Orthodox Yeshiva, I simply wish to point out that any food container, regardless of what it has been previously used for, can be made Kosher by thorough cleaning under the supervision of a qualified Rabbi. Not any Rabbi, but one that has been qualified by a Beit Din ("house of rules") of three already qualified Rabbis. The Hebrew term for such a Rabbi is "Mashgiyah." He is the one who supervises the kitchen, by regular inspections, of Kosher restaurants, growers, wine producers, wisky makers, etc. Any tank-car or freight car or container loading location can in the USA can probably locate such a Rabbi within a one or two-hour drive. The profession of being a Mashgiyah is as specialized as the profession of being a "Moel," a Rabbi who does circumcisions, with detailed rules. So any frieght car that can be cleaned thoroughly can be made Kosher, regardless of previous history of lading. And yes, a plate or fork that can be cleaned thoroughly (and this excludes certain types of ceramics, and of course paper) that had contact with pork can be made Kosher by thorough cleaniing. Some ultra-Orthodox might still not accept it if they knew, however. My Yeshiva is not Ultra-Orthodox, although we have one teacher who teaches their point of view. I won't fail to ask him that question.
As a Rabbinical student in an Orthodox Yeshiva, I simply wish to point out that any food container, regardless of what it has been previously used for, can be made Kosher by thorough cleaning under the supervision of a qualified Rabbi. Not any Rabbi, but one that has been qualified by a Beit Din ("house of rules") of three already qualified Rabbis. The Hebrew term for such a Rabbi is "Mashgiyah." He is the one who supervises the kitchen, by regular inspections, of Kosher restaurants, growers, wine producers, wisky makers, etc. Any tank-car or freight car or container loading location can in the USA can probably locate such a Rabbi within a one or two-hour drive. The profession of being a Mashgiyah is as specialized as the profession of being a "Moel," a Rabbi who does circumcisions, with detailed rules. So any frieght car that can be cleaned thoroughly can be made Kosher, regardless of previous history of lading.
And yes, a plate or fork that can be cleaned thoroughly (and this excludes certain types of ceramics, and of course paper) that had contact with pork can be made Kosher by thorough cleaniing. Some ultra-Orthodox might still not accept it if they knew, however. My Yeshiva is not Ultra-Orthodox, although we have one teacher who teaches their point of view. I won't fail to ask him that question.
Thank You!
schlimm China and Chinese companies have a lot of cash looking to be invested. seems to me someone there thought Smithfield was a good investment. Whether the production is exported or stays here is irrelevant.
China and Chinese companies have a lot of cash looking to be invested. seems to me someone there thought Smithfield was a good investment. Whether the production is exported or stays here is irrelevant.
I don’t think it is an irrelevant question to ask whether production stays here or is exported. When I read about pork production in China, it sounds like they are facing a major problem in meeting their domestic demand. So having extra cash to look for foreign investment is one thing, but it sounds like this deal is as much about seeking to increase the pork supply in China as it is to find a place to invest their money.
So assuming that Smithfield’s market is suddenly doubled or tripled to meet underserved demand in China, will Smithfield expand accordingly to serve it, or will they simply redirect their existing production? If they increase their production, that increases the net transportation need. That too might affect rail in a way that differs from simply redirecting existing production to serve the Chinese market.
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