For La Gloria, the stench of blame is from pig factories

The worried manager of an industrial-sized pig farm in the little Mexican town of Xaltepec invited in journalists in an effort to calm things down. "What happened was an unfortunate coincidence," he told them, insistently. More than 2,000 miles away, in New York, the world's richest "pig baron", Joseph Luter III, is hoping he is right.

Downwind of Xaltepec – where 15,000 squealing hogs are squeezed into 18 warehouses – residents of La Gloria blame Smithfield, Luter's firm, for an outbreak of respiratory problems that swept the town last month, killing two children. Now with Mexican authorities identifying a four-year-old from the town, Edgar Hernandes, as one of the first-known cases of swine flu, furious residents believe that they are ground zero of a pandemic threatening the world. The very suggestion has sent a shudder through the ranks of campaigners who have long argued that the sort of industrialised pig farming that has turned Smithfield into one of the most powerful corporations in the US, with a market value of $1.4bn, was a disaster waiting to happen.

For Smithfield, the world's largest pork supplier, which processes more than one in three pigs killed in the US and jointly owns the Xaltepec plant and seven others in the region, the spiralling concern in Mexico threatens to become a worldwide marketing disaster – even before anyone is able to test the hunch of the people of La Gloria.

A team of UN veterinarians is arriving in Mexico to examine whether this new deadly strain of swine flu, mixed as it is with genetic material from avian and human strains, could be lurking in pig populations undetected. Smithfield says none of its pigs are sick but the company has sent samples for testing.

Victor Ochoa, the Xaltepec manager, ensured employees washed down cars coming into the plant yesterday and made journalists from the Associated Press shower and don protective clothing before entering. In common with his bosses back in the US, Mr Ochoa insisted that all 15,000 animals had been properly vaccinated, that the plant met all the required health standards, and that the vast swimming pool of faeces – industrial pig farming's toxic by-product – was covered with a lid to limit the exposure to the outside air. "What happened in La Gloria was an unfortunate coincidence with a big and serious problem that is happening now with this new flu virus," he said. La Gloria residents, though, have been protesting against the farm for months.

Starting in February, one in six of the 3,000 residents reported health problems. The government initially dismissed the spike as a late-season rise in ordinary flu, but by April, health officials sealed off the town and sprayed chemicals to kill the flies that residents said were swarming about their homes.

The business practices of Smithfield are a far cry from its origins, lovingly recounted in sepia-tinted prose on its corporate website. "The Luter family of Smithfield, Virginia, has been curing and selling hams since the turn of the century," it says.

The reports of swarming flies, terrible smells and pictures of rotting pigs left scattered around the perimeter of its industrialised pig farms in Mexico are echoes of the concerns that have long been troubling environmental activisits, campaigning against Smithfield in all the countries in which it operates, not least in the US. Critics say that – even on top of any questions about the humane treatment of the pigs – the sheer quantities of manure that have to be disposed of when thousands, or tens of thousands, of animals are housed together make it impossible to run this business in a safe way.

The manure is collected in a lake underneath the pig pens and then washed into giant pools or lagoons. It is eventually sprayed on nearby fields, but the lagoons have a habit of leaking or flooding.

In 1997 Smithfield was fined $12.6m for violation of the federal Clean Water Act. Its most recent financial reports show it is being sued in Missouri by residents near a facility there who accuse it of being a public nuisance, while a farm in Pennsylvania is under federal investigation over releases into the local water in 2007.

The other risk, scientists say, of concentrating so many pigs together is the risk of diseases spreading fast, a problem that farmers overcome by pumping the livestock full of vaccines and other drugs. In 2007 an outbreak of swine flu at its farms in Romania cost the company $13m.

Tom Garrett, a Wyoming ecologist who campaigned against Smithfield's expansion into Eastern Europe, where he said it would push small farmers out of business and lead to environmental problems, warned that the company can exploit corrupt local officials and lax regulation in countries outside the US. "They are looking for two things when they set up a farm – water, and naive local people who don't try to fight them off until they have dug in."

Smithfield says it is always investing in research to improve farming methods and operates its facilities to the highest standards. Its public relations message is complicated, however, by the uncompromising stance of chairman Joseph Luter III. Animal rights activists "want to impose a vegetarian society", the 67-year-old once said, and vegetarians are "neurotic".