Iowa Attorney General and Smithfield Foods agree to drop suit AG brought againstSmithfield for packer's acquiring forward contracts to purchase livestock for slaughter. 8th Circuit had remanded Southerndistrict of Iowa Federal Court's ruling finding the Iowa law against packer ownership of livestock violated federal dormant commerce clause. Iowa legislature had amended portions of its anti-packer integration law after the federal district court ruling, but ultimate decisionwas still up in the air. This follows recent 11th circuit ruling that IBP/Tyson had not violated the FEderal Packers and Stockyards act for carrying out similar trade practices. Senators Harkin and Grassley find common ground in proposing a federal law similar to the IOwa anti-packer integration law.Iowa Farmer Today DES MOINES -- After a tough six-year game of legal football, the Iowa Attorney General's office and attorneys from Smithfield Foods agreed to call it a tie and go home.At least that's the way some might describe the settlement announced late last week of a lawsuit over the state's ban on packer ownership of livestock. "I think it reflects the reality of the situation," says Roger McEowen, associate professor of agricultural law at Iowa State University. "In a perfect world, this would be settled. . . . It's not a perfect world." Instead, the settlement announced Sept. 16 will allow Smithfield to continue owning packing plants and contracting for hogs with Iowa producers in exchange for the company dropping its challenge to Iowa's ban on packer ownership of livestock. The company also will agree to a number of requirements for treatment of farmers who have contracts with it. The law stays on the books, but the state will not enforce it against Smithfield. That, McEowen says, may be the best attorneys from both sides could hope for. To continue with the case would require time and money, and the outcome would still be in doubt. The case began in 1999, when the state attorney general sought to block Smithfield Foods from buying Murphy Family Farms, a North Carolina-based company that contract fed hogs and had several hundred producers in Iowa under contract. Smithfield already owned packing plants in Iowa. State law bans packers from owning livestock. The company later sued in federal court to have the law overturned. It won the first round when U.S. District Court Judge Robert Pratt ruled in January 2003 the Iowa law violated the commerce clause of the U.S. Constitution. The clause says states cannot regulate business that operates across state lines. Iowa Attorney General Tom Miller appealed that ruling to the Eighth Circuit U.S. Court of Appeals in St. Louis. The court of appeals threw out the ruling and sent the case back to Pratt, who was then scheduled to hear arguments on the case in May 2006. The Sept. 16 announcement of a settlement makes that unnecessary. Describing the case as "difficult," Miller says pushing it would be an "uphill" battle that would require time and money. With that in mind, both sides began to talk about a settlement. "Frankly, a good settlement is more satisfying than a court decision," says Richard Poulson, executive vice president and general counsel of Smithfield. "We have to do this together." The settlement was approved by Gov. Tom Vilsack and legislative leaders of both political parties. It says if Smithfield abides by its part of the agreement, the state will not enforce the ban on packer ownership or control of hogs against the company for 10 years. In return Smithfield agrees to a number of measures, most regarding its dealings with farmers, including: > For two years, at least 25 percent of the hogs collectively slaughtered at its Iowa plants and its Sioux Falls, S.D., plant will be purchased on the open market from sellers other than Smithfield affiliates. >The company has informed the attorney general it intends to keep its Iowa plants and its Sioux Falls plant open and agrees to provide 90 days notice of any plant closure to the attorney general. >Smithfield will spend $100,000 a year for 10 years to fund environmental programs at Iowa State University that will train the company's pork producers in environmental practices. >Smithfield will spend $100,000 a year for 10 years on a grant program for Iowa citizens and organizations pursuing innovative programs to advance swine production in the state. >The company will not coerce, retaliate against or discriminate against a contract producer who exercises producer rights. That would include termination of contracts. >Smithfield would not require contract producers to make capital investments in addition to what is already stipulated in the contract unless fair compensation is paid to the producer. >Smithfield would not require producers to use binding arbitration to resolve disputes. >Smithfield must not finish hogs in company-owned facilities for at least five years. The only exception to this would be in cases where the company needs to replace producers who decide they do not wish to continue finishing hogs under the same or better economic terms. >"Whistleblowers" will not be punished and contract producers will be allowed to join associations, use contract producer liens and to publicly discuss and disclose the terms of their contracts. Poulson says the company has no qualms about those requirements. "Smithfield growers already have those rights," he says. "We do not mistrust our farmers." Miller has been pushing to make many of those producer rights provisions state law under a proposed "Producer Protection Act." But, after several years, the proposed act has not been passed by the Legislature. The governor and legislative leaders from both parties issued statements after the settlement was announced saying they support the agreement. A news release from Iowa Citizens for Community Improvement said the settlement does not help farmers get a fair price or reverse the corporate takeover of the livestock industry. Sen. Tom Harkin, D-Iowa, issued statement saying the settlement came in part because federal courts in recent years have not been kind to state laws governing commerce. Because of that, he said, the federal government needs to enforce the Packers and Stockyards Act and anti-trust laws. "Federal enforcement of these laws has been virtually nonexistent in recent years," he said. Harkin and Sen. Charles Grassley, R-Iowa, have pushed federal legislation to ban packer ownership of livestock. They also have supported a national version of the producer protection act and have urged the Iowa Legislature to pass the state version of that proposal.