Tyson plan prompts government investigation

Wednesday, August 21st 2002, 12:00 am
By: News On 6

OKLAHOMA CITY (AP) _ The U.S. Department of Agriculture launched an investigation of Tyson Foods Inc. on Tuesday in response to the company's plans to sever contracts with 132 hog farmers in eastern Oklahoma and Arkansas, according to a published report.

The Daily Oklahoman, in a copyright story published Wednesday, reported that the agency rushed an investigative team to the Springdale, Ark.-based company's headquarters to scrutinize the world's largest meat processor.

``We are in fact sending a rapid response team to investigate the situation,'' Agriculture Department spokeswoman Leah Akbar said. ``At this point in time, because it is an active and ongoing investigation, we don't have a lot to say.''

Company spokesman Ed Nicholson said Tuesday he knew nothing about an investigation.

The company announced Sunday that it will discontinue contracts with hog farmers in eastern Oklahoma and Arkansas. Twenty-three contracts are with farmers in Oklahoma.

The Agriculture Department sent investigators from its Grain Inspection, Packers and Stockyards Administration division to look into why the company is canceling contracts, Agriculture Department spokesman Jerry Redding said.

The division administers the Packers and Stockyards Act of 1921, which prohibits unfair, deceptive and fraudulent practices by hog production contractors, packers, stockyards and others.

Tyson's hog farm contract phase-out began this week and is meant to stave off losses in the pork division of the world's largest processor and marketer of beef, chicken and pork, according to the company.

Tyson reported increasing quarterly net income and total revenue figures. For the quarter ending June 29, the company's net income rose to $107 million, compared with nearly $48 million for the quarter ending Sept. 29. Total revenue for the quarter ending June 29 jumped to $5.9 billion, compared with about $5.3 billion for the quarter that ended in September.

Tyson posted an $8 million third-quarter operating loss in the pork division, mostly because of lower hog prices. Cash hog prices are about $30 per hundredweight, below the cost of producing hogs.

Global companies like Tyson typically contract with small family farmers to raise the corporation's animals, feed them company pellets in company-designed housing and manage them under company guidelines to produce a consistent product sold to the company. Farmers often sign hundreds of thousands of dollars in loans to set up their operations.

Most of Tyson's contract farmers who stand to lose their contracts have been with the company seven to 10 years, state Agriculture Commissioner Dennis Howard said.

Of the 23 apparent contract losers in Oklahoma counted by the state Agriculture, Food and Forestry Department, 15 are in McCurtain County, five are in Delaware County, two are in Adair County and one is in Grady County.

Nicholson said nearly all of the contracts were up for renewal or nearly up for renewal. He said the number of farms affected is 159, with 92 farms unaffected.

In a press release, Tyson said the company will benefit from eliminating the cost of shipping grain from the Midwest to the hog farms. Additionally, Nicholson said transporting 260-pound hogs to processing plants in Iowa, Nebraska and Indiana make competition difficult.