020827 USDA Reviewing Tyson's Pork Restructuring

Chicago -- The Department of Agriculture has initiated a probe of Tyson Foods Inc. after the company said earlier this week it would restructure its hog business and discontinue relationships with 132 hog producers.

Department spokesman Jerry Redding said the agency will examine the "honesty" of the contracts between the company and the hog producers, all of which are located in Arkansas and eastern Oklahoma. The department oversees the Packers and Stockyards Act of 1921, which, among other things, prohibits deceptive and fraudulent business practices in the hog industry.

A so-called "rapid response team" consisting of about two or three investigators was sent to Tyson's headquarters in Springdale, Ark.. The group started work on Wednesday morning, said Mr. Redding. He added probes of this sort are common given the size and scope of Tyson's plans for its swine operations.

"We go in with no suspicions," noted Mr. Redding. "It was a substantial number of people and hogs involved -- anytime something is that large, we get involved. We're looking out for the producers."

Tyson said that the restructuring moves within the hog division were needed to more effectively position the group for the future. In addition to the discontinued relationships with the hog farmers, Tyson noted the restructuring would result in the elimination of about 200 jobs and the closure of company- owned and leased hog farms. A total of 159 farms were affected by the announcement.

"We've been running this division at an operating loss," said Chief Executive John Tyson in a statement. "Therefore, it is now time to do what we must to try to ensure the long-term viability of the remaining part of this business."

The move, which will reduce fourth-quarter pretax earnings by between $20 million to $30 million, will reduce the total number of sows by 30% to 70,000. The phase-out will begin this week and should be complete in March.

The restructuring comes nearly a year after Tyson completed its acquisition of beef and pork meatpacker IBP Inc. Tyson said when it released its fiscal third- quarter results last month that it was mulling the fate of the live pork- production business.

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