Iowa, Tyson reach hog production settlement

by Bryan Salvage
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DES MOINES, IOWA — U.S. District Court Judge Robert W. Pratt on Sept. 11 approved a Consent Decree submitted by the State of Iowa and Tyson Fresh Meats, a subsidiary of Tyson Foods Inc., that sets out the terms of a settlement reached between the state and Tyson resolving a dispute over the constitutionality of Iowa’s prohibitions against processors vertically integrating into pork production in Iowa, announced Iowa Attorney General Tom Miller.

"This agreement enables Tyson to pursue its stated plans to maintain its business operations in Iowa," Mr. Miller said, "and it protects the rights and interests of Tyson’s contract producers."

Mr. Miller said he was pleased to have reached an agreement with Tyson that is very beneficial for Iowa’s pork industry, "especially since the likely alternative was lengthy and costly litigation with uncertain results."

Tyson states in the agreement a desire to maintain its business operations in Iowa, including maintaining its swine procurement in Iowa, maintaining the volume of pork processed at its Iowa plants and taking advantage of the opportunity to engage in hog production contracting. The agreement will allow Tyson’s business in Iowa to proceed, which is important for economic development and competition in the pork business, Mr. Miller 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," said Jim Lochner, Tyson's senior group vice-president of Fresh Meats. "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. This is especially important in today’s economic environment. The decree also puts Tyson on equal footing with other pork processors who already have similar agreements with the state."

Tyson has agreed that when it deals with Iowa contract growers, it will be bound by rules guaranteeing fairness, Mr. Miller said. 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.

"The agreement also has strong protections that will allow Tyson producers to organize and use bargaining associations," Mr. Miller added. "This will increase the economic bargaining power of Iowa contract producers and give them the opportunity to negotiate for their fair share of the returns in swine 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 with respect to Tyson, Mr. Miller said. The agreement expires on Sept. 16, 2015.

"There is no allegation here that Tyson violated Iowa law," Mr. 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. It permits Tyson to move ahead with its stated intention of maintaining its business operations in Iowa and gives Tyson the opportunity to engage in hog production contracting — in a manner that reasonably protects the economic and legal interests of contract producers."

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