Hog Farmers File Suit Against Tyson Foods

September 12, 2002

By John Henry

jhenry@abpg.com

Daily News

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As expected, at least 80 separate Arkansas and Oklahoma hog producers who grew live hogs for Tyson Foods Inc. filed a lawsuit Thursday in Pope County Circuit Court for undetermined damages caused by the financial and emotional collapse of their farming operations.

On Aug. 18, Tyson Foods said that it would eliminate 200 positions at its live swine operations in hopes of strengthening the long-term viability of the rest of its company.

The move also caught the attention of the U.S. Department of Agriculture, which began an investigation into the Springdale company two days after the announcement.

In its Aug. 18 news release, Tyson said it would restructure its hog business and discontinue relationships with 132 hog producers in Arkansas and eastern Oklahoma.

Department of Agriculture spokesman Jerry Redding said the agency would examine the “honesty” of the contracts between the company and the hog producers.

The Agriculture Department oversees the Packers and Stockyards Act of 1921. The act prohibits deceptive and fraudulent business practices in the hog industry. About 159 farms were affected by Tyson's announcement.

Attorneys James J. Thompson, Jr., Clark W. Mason of the Hare Wynn Newell and Newton law firm accused Tyson of abandoning its hog farmers and “disregard for its corporate responsibility and the devastation the profit-driven decision has and will cause.

“Tyson's actions were deliberate and calculated,” Thompson said. “We're convinced that Tyson knew it intended to shift its hog production in a different direction, yet Tyson continued to make false statements and promises to farmers … leading them to go even further into debt and alter their operations” to meet Tyson's requirements.

Thompson also said the farmers were not only saddled with debt but that their farms were now useless for other farm operations because of the waste lagoons and other waste storage areas that must be maintained or removed at substantial cost to the farmer.

John Tyson — Tyson Foods’ chairman, president and CEO — said the restructuring was imminent. “We've been running this division at an operating loss,” he said.

Tyson representatives have met with the affected contract producers and presented a proposal that the company believed satisfied its obligations under existing contracts.

Tyson revised its closure proposal to address many of the producers’ concerns.

Ed Nicholson, spokesman for Tyson, said the company had reached an agreement with several of the producers.

Tyson said its live swine business lost about $25 million in the third quarter of this year alone and continues to have negative results. This restructuring was necessary to address these losses, the company said.

Tyson's move, which will reduce fourth-quarter pretax earnings by between $20 million and $30 million, will reduce the total number of sows by 30 percent to 70,000. The phase-out was to begin last week and be complete in March.

Tyson purchased beef and pork meatpacker IBP Inc. on Sept. 28, 2001.

Link

arkansasbusiness.com/news/category.asp?cid=1 

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