Smithfield embodies China’s record hunger for farms

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 soybean-loaded trucks headed to export terminals in the south.

Dressed in polo shirts, jeans and boots, the officials from five state-owned companies that imported 40 percent of China’s soybeans last year, had traveled six hours to see the oilseed being moved from farms to ports during a tour organized by Rabobank Groep. They’re part of a growing Chinese contingent that’s 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 $32.7 billion splurge in the past five years and just $4.2 billion in the prior half-decade, data compiled by Bloomberg show. The drive for assets from Brazil to the U.S. and Australia has ignited concern by lawmakers only heightened by Shuanghui International Holdings Ltd.’s $4.7 billion deal to buy Smithfield Foods Inc. of the U.S., the biggest hog producer.

“There is immense interest and exploration by Chinese investors right across the agriculture sector,” said Michael Whitehead, agribusiness research director at Australia & New Zealand Banking Group Ltd. “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.”

M&A Talks

China’s announced purchases in agriculture including pastoral land, farm chemicals, processors and food companies, have already reached about $7.8 billion this year, compared with the record $8.1 billion in all of 2010, according to data compiled by Bloomberg.

In the mining and steel industries, deals are headed for the lowest since 2003, with China’s acquisitions at $2 billion so far this year.

During the tour of Brazil led by the Netherlands’ Rabobank, the Chinese executives, including heads of mergers and acquisitions, visited a soybean-crushing plant and a biodiesel plant. They met with large-scale farmers in Mato Grosso, the biggest soybean producing region, said Oswaldo Junqueira, head of trade commodity finance at the Utrecht-based lender’s Sao Paulo unit.

“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 U.S. states, would be the largest Chinese acquisition of a U.S. company and follows a string of global food and agricultural-related purchases.

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