Shuanghui Group (it’s known as Shineway Group in English-speaking countries) is a privately owned meat processing company which is the largest meat producer in China. In May 2012, Shuanghui made a US$4.7 billion offer for Smithfield Foods, a US-based pork group.
Hunger for farm assets
Mainland firms are buying food companies globally to feed a nation that has 20pc of the world's people and only 8pc of its farmland
On a sunny March afternoon, 11 Chinese executives armed with digital cameras and iPads got out of a van on Brazil's highway BR-163 to photograph soyabean-laden trucks headed to export terminals.
Dressed in polo shirts, jeans and boots, the officials from five state-owned companies, which together imported 40 per cent of China's soyabeans last year, had travelled six hours to see the oilseed being moved from farms to ports during a tour organised by Rabobank of the Netherlands.
They are part of a growing Chinese army that is scouring the world for farm assets or food technologies that can be brought to the world's most-populous nation.
China is headed to spend a record this year on food assets and farms after a US$32.7 billion splurge in the past five years, up from just US$4.2 billion in the previous five years.
The drive for assets, from Brazil to the United States and Australia, has ignited concern heightened by Shuanghui International's US$4.7 billion deal to buy Smithfield Foods of the US, the world's biggest pig producer.
Michael Whitehead, an agribusiness research director at Australia & New Zealand Banking, said: "There is immense interest and exploration by Chinese investors right across the agriculture sector. We know of Chinese companies which are fairly well down the track in their due diligence of a whole range of things, whether it's dairy, wine, protein, or grain."
China's announced purchases in agriculture including pastoral land, farm chemicals, processors and food companies, have already reached US$7.8 billion this year, against the record US$8.1 billion in all of 2010. In the mining and steel industries, deals are headed for the lowest since 2003, with China's acquisitions at US$2 billion so far this year.
During the tour of Brazil led by Rabobank, the Chinese executives, including heads of mergers and acquisitions, visited a soyabean-crushing plant and a biodiesel plant. They met large-scale farmers in Mato Grosso, the biggest soyabean-producing region, said Oswaldo Junqueira, the head of trade commodity finance at the bank's Sao Paulo office.
"The trip provided opportunities for M&A discussions," said Junqueira, who accompanied the Chinese delegation on part of the tour.
Shuanghui's bid for Smithfield, which owns 460 farms and has contracts with 2,100 others across 12 US states, would be the largest Chinese acquisition of a US company and follows a string of global food and agricultural-related purchases.
In August, Australia approved the sale of Cubbie Station, the nation's biggest cotton farm and water rights holder, to a Chinese-led group for US$235 million.
Bright Food, China's second-largest food company, agreed in May last year to buy a 60 per cent stake in the British cereal manufacturer Weetabix, valuing the maker of Ready Brek and Alpen cereals at about £1.2 billion (HK$14.5 billion).
China's acquisitions were being driven by the desire to secure volumes of safe produce for import and, in the longer term, access to the transfer of technology, said Craig Armitage, an advisory global leader for food and agriculture at PricewaterhouseCoopers New Zealand.
As well as established targets such as Australia and Brazil, there was growing opportunities for Chinese investment in southern Africa, parts of Russia and Europe, he said.
"Holdings in industry-leading farmers and processors around the world give Chinese companies access to the intellectual property that drives it all," said Armitage, who pointed to China's food safety scandals, including the death of at least six infants in 2008 from tainted milk, as a motive for the overseas acquisitions. "This will ultimately drive a steeper increase in the productivity of China's domestic production."
Beijing's push to secure more foreign agricultural assets came after a surge in global food prices in 2007 and 2008. With 20 per cent of the world's population and just 8 per cent of its farmland, China needs to spend US$861 billion developing its farm sector until 2050 to produce crops and livestock to feed its people, the United Nations estimates.
Wheat and rice, the most consumed food grains, rallied to a record in 2008, while maize and soyabeans reached record highs last year, topping earlier peaks of 2008.
World food prices were little changed last month with an index of 55 food items tracked by the UN's Food and Agriculture Organisation down 0.3 per cent at 215.2 points. The gauge reached a record in February 2011.
China's rapid urbanisation, pollution and limited supply of arable land and water were prompting the nation to increase trade and investment with countries in southeast Asia, Australia and New Zealand, said Doug Ferguson, a partner in charge of the Asia business group with KPMG Australia, who recently returned from China.
Food security was "critically important" to the Chinese government, Ferguson said.
Beijing's farm and food asset acquisition drive may be hindered by stricter government controls in target countries.
However, Armitage said: "This is just the start of China's food entities identifying strategic partners and acquisition targets."
For target countries, "it's a balancing act between attracting foreign capital and balancing the need for local production", he said.