Smithfield's Romanian investment to exceed 1 billion Euro

The decision was made due to the rise in costs for building farms and delays in accessing EU structural funds, according to sources close to the company.
Smithfield Romania’s Corporate Affairs Director, Ioan Cotosman, told Business Standard that the company “is carefully analyzing its investments in Romania, given the ban on intra-community commerce and delays in EU fund allocations for Romanian farmers.”

The increase in funds for Romania was not yet approved by the U.S. group’s shareholders, but they are considering such a decision, the sources said. The rise in expenditures for building farms is due to higher prices of land and construction materials. Smithfield officials announced two years ago that it will invest more than 800 million Euro to build some 200 hog farms in Western Romania by 2011, in partnership with local farmers. Their plan was to raise 4 million pigs annually and sell most of the meat on markets outside Romania.

The farms would also cover local market demand, as some 70 percent of pork consumed in Romania is presently imported.
More than five million hogs are raised annually in Romania, of which 1.6 million are in industrial farms and the rest are raised by individual farmers. The main producers on the local market are Kosarom, Suintest Peris and the Caruz group of companies, owned by businessman Gheorghe Caruz.

Besides higher construction costs, Smithfield will also have to deal with pig vaccination, a mandatory procedure for all industrial pork producers. Romanian authorities have decided that animals must be vaccinated due to the swine flu, a disease affecting a large number of pigs in Romania. But once the animals are vaccinated, their meat will be banned from export to the EU, as vaccination does not comply with EU food safety regulations. Furthermore, the number of farmers who began investing in pig farms in partnership with Smithfield is low. Only about 10 farmers have joined the program, but Smithfield officials expect their number to increase to 180-200 next year.

To date, the U.S. company has invested 300 million  Euro in Romania. The company entered the Romanian market in 2004, after buying 80 percent of former state-owned Comtim Timisoara. Smithfield later bought shares in other meat production and transportation companies.
Smithfield Foods, Inc., based in Virginia, was established in 1936, as a regional meat processing company. It currently raises over 14 million hogs annually and has sales of some 11 billion  Euro a year.
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