Friday, April 07, 2006

Hormel Reaches Packer Feeder Settlement With Iowa

It is reported in the Register today that Hormel and the Iowa AG's office have reached a settlement agreement that may leave intact the Iowa packer-feeder prohibition. In the settlement agreement, Hormel will get the ability to acquire more hogs from Iowa farmers and process more pork, while agreeing to a contract producer's "Bill of Rights" which grants producers a private cause of action regarding those rights.
Among the salient features of the agreement are a cap on required investment over the contract value, a bar on requiring binding arbitration, a bar on finishing hogs in Hormel owned facilities for five years, a two year purchase requirement of 25 per cent open market hogs from independent producers and a 90 day notice of closing any of Hormel's four processing plants in Iowa.
Apparently the state and the large pork integrators are in the process of reaching something of a modus vivendi with respect to the packer feeder prohibition. Agreements of a similar nature are envisioned with other integrators who wish to operate in Iowa, according to Steve Moline of the Iowa Attorney General Farm Division.
Whether this serves the long term interests of Iowa farmers is yet to be seen, but the history of vertical integrators is not a pretty one, if we can learn anything from the past forty or so years in the poultry industry. Also, whether the integrators will keep the bargain they've made or are already burning the midnight oil trying to lawyer their way around it is as yet unknown.


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