May 31, 2013 at 8:08 AM ET
The proposed $4.7 billion sale of Smithfield Foods, America’s largest pork producer, to China’s biggest meat processing company comes amid significant trade friction between the two countries over meat and livestock.
China bans ractopamine, a controversial growth-promoting drug that is widely used by U.S. livestock producers. Russia also bans the feed additive and both countries have recently stepped up residue testing in meat, worried about the health effects of the drug. The actions have constrained American meat exports.
The U.S. Food and Drug Administration approved ractopamine as safe more than a decade ago and more than two dozen other countries have followed suit. But China, Russia, the European Union and several other countries question its safety and refuse to accept meat from animals raised on the drug, a beta-agonist that boosts lean muscle growth and improves the rate at which animals convert feed to meat.
Industry experts say the long-running trade fight may have been a factor in the sale of the U.S. pork giant, as China seeks to gain access to more pork, which is by far the country’s most-consumed meat.
“This (deal) is probably a direct result of the ractopamine issue,” said John Saunders, CEO of Where Food Comes From, a third party auditing company that helps companies verify marketing claims.
The U.S. pork industry, which sold more than a quarter of its products abroad last year, is now creating separate ractopamine-free supply chains to gain greater access to overseas markets and meet the demands of both Russia and China.
In March, Smithfield Inc., converted its Tar Heel, N.C. plant – the world’s largest pork processing facility – to slaughter only hogs that were raised without the use of ractopamine.
With the conversion of its third plant, the company’s product line will be 50 percent ractopamine-free as of June 1. The company would not say how much of the ractopamine-free pork it exports to China, but said it is shipping product there “every day.”
Earlier this year, China and Russia demanded that all American meat exports be certified ractopamine-free.
The U.S. government initially refused these certification demands, so Russia shut down its market to U.S. beef and pork in February. An official from the U.S. Trade Representative’s office - speaking before the Smithfield deal was announced – said the government is “extremely concerned” about the “unwarranted” bans and continues to engage China, Russia, and others to drop their restrictions.
IMI Global, Inc., a division of Where Food Comes From, has applied for a USDA process verified program that would certify pork and beef as coming from animals not fed ractopamine, or zilpaterol, another beta-agonist widely used in cattle. Under a similar program, the company already verifies that U.S. meat headed for the EU meets their import requirements, which prohibit growth promoters of any kind.
U.S. trade officials would not comment on when a certification program might be approved, but many in the industry view it as inevitable.
“We’ve had conversations with a majority of beef and pork packers about their path forward on this issue,” said Saunders, the CEO of Where Food Comes From. “They’re all engaged in conversations about this.”
The U.S. Meat Export Federation (USMEF) estimates that losing the Russian market will cut more than $560 million in sales, but the overall impact is projected to be closer to $800 million because some of the items Russia buys, like beef livers and hams, will add to the global supply and depress prices.
While closed to U.S. beef, China is an essential market for pork products. Last year, China purchased nearly 16 percent of all U.S. pork, worth more than $700 million, according to the USMEF.
While China has continued to accept U.S. pork as long as companies assure it is ractopamine-free, the Chinese government has stepped up residue testing in recent months and is now demanding third-party certification to verify the additive is avoided. According to USMEF, USDA officials have requested a meeting in Moscow June 17 to present Russian officials with a government-verified program to meet Russia’s demands.
“In the last three months, these issues have really started to hit companies’ bottom lines,” said Keith Belk, a meat safety and quality professor at Colorado State University.
Belk said the situation is “changing day by day” as several companies mull whether they should create a ractopamine-free program for export.
In the U.S., some consumer advocates are worried that the majority of ractopamine-free pork will be shipped abroad.
“American’s aren’t getting the ractopamine-free pork,” said Elisabeth Holmes, a staff attorney for the Center for Food Safety, which recently petitioned the FDA to re-evaluate the drug’s impact on human health and animal welfare and lower the trace residue levels that the agency considers safe in meat products.
The petition, co-filed by the Animal Legal Defense Fund in December, cited a 2012 report by The Food & Environment Reporting Network on NBCNews.com that found ractopamine had been linked to more reported adverse drug experiences in pigs than any other veterinary drug. Reports from producers commonly cited hyperactivity, trouble walking, and death.
The FDA says the reports do not establish the drug caused the adverse effects and maintains ractopamine is a safe and effective compound for food animal protection.
While few consumers are aware of ractopamine’s use in meat production, the drug has been at the center of international trade disputes for several years. The EU questions the science backing the feed additive, China says it’s worried about the higher levels of drug residues that can be found in pig organs, which are part of a traditional Chinese diet, and Russia claims the drug could pose health risks.