Tyson, attorney general drop legal battle, deal keeps Tyson in IA pork business in IA

Monday, September 21, 2009

Tyson Foods and the State of Iowa have dodged a legal battle over the company's constitutional right to be involved in production of the hogs that its plants process, inking a deal that should enable Tyson to maintain its huge pork business in Iowa, including the Storm Lake plant.

"The agreement will allow Tyson's business in Iowa to proceed, which is important for economic development and competition in the pork business," Iowa Attorney General Tom Miller said.

U.S. District Court Judge Robert W. Pratt approved the agreement between the State and Tyson Fresh Meats.

The settlement encourages Tyson "to pursue its stated plans to maintain its business operations in Iowa," Miller said, "and it protects the rights and interests of Tyson's contract producers."

Miller said the deal will be benefitial for Iowa's pork industry, especially since the likely alternative was lengthy and costly litigation with uncertain results.

Earlier this month, Tyson filed a lawsuit claiming State Code provisions banning a processor from owning, operating, financing or controlling hog production facilities in the state violated the U.S. Constitution. Hormel, Cargill and Smithfield Foods meatpackers have made similar claims in recent years.

Tyson officials said they want to keep doing their pork business in Iowa, and need to maintain the volume of pork processed at its Iowa plants, including the local facility that is easily Storm Lake's largest employer. The company plans to take advantage of the opportunity to engage in hog production contracting.

Tyson reportedly also agreed that for two years, 25 percent of the hogs slaughtered at plants in Waterloo, Storm Lake, Columbus Junction and Perry would be bought on the open market from sellers other than Tyson affiliates.

"The agreement will allow Tyson's business in Iowa to proceed, which is important for economic development and competition in the pork business," Miller said.

Jim Lochner, Tyson's Senior Group Vice President of Fresh Meats said: "Our company has historically depended on independent pork operations of all sizes to supply us with a large majority of the high quality hogs we process. We want to continue to rely on independent producers and do not intend to become a vertically integrated processor. We believe this agreement will provide greater flexibility in our marketing relationships with pork producers, helping ensure the producers have a competitive outlet for their livestock and we have a steady supply of hogs to run our plants."

"The decree also puts Tyson on equal footing with other pork processors who already have similar agreements with the state," Lochner added.

Miller said, "Tyson has agreed that when it deals with Iowa contract growers it will be bound by rules guaranteeing fairness. Tyson contract growers will be given a 'contract producer's bill of rights' and the ability to enforce the safeguards in court, including the prospect of receiving attorney fees if they are successful. This is an important enforcement tool," he said.

The agreement also holds some protections for Tyson producers - allowing them to organize and use bargaining associations, to negotiate for their fair share of the returns in swine production, Miller said. They have the right to be "whistle blowers", to make public terms of their contracts with Tyson, and to seek liens if they feel they are not properly paid for their production.

In return for Tyson's compliance with its commitments under the settlement, the State will not pursue enforcement of the ban on packer involvement in swine production against Tyson, Miller said. The deal runs to 2015.

"There is no allegation here that Tyson violated Iowa law," Miller said. "On the contrary: Tyson approached our office to begin negotiations prior to engaging in production contracting. The agreement settles a dispute about the constitutionality of Iowa law and avoids litigation (and) reasonably protects the economic and legal interests of contract producers."

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