Smithfield Foods, Inc., the nation’s largest pork producer, has dropped its legal challenge of Iowa’s ban on meat packer ownership of livestock in a settlement agreement.
Smithfield sued the State of Iowa in 2002, claiming Iowa’s ban on packer ownership of livestock infringed on interstate commerce.
The agreement permits Smithfield "affiliates" to contract directly with Iowa farmers for hogs and requires the company to purchase 25 percent of its hogs on the open market for two years. Smithfield is prohibited for five years from using hogs finished at company-owned farms, except to replace those provided by producers who terminate their contracts with the company.

A federal judge ruled in 2003 that Iowa’s ban discriminated against out-of-state interests, but the 8th Circuit Court of Appeals reversed the decision last year. Iowa lawmakers have amended the law to remove language that formed, in part, the basis for the original court’s decision.

Major terms of the settlement agreement are:

1. Smithfield agrees that its Iowa producers shall have a set of identified producer rights, which include, but are not limited to the following:
   A. Right to join an association.
   B. Right to be a "whistleblower".
   C. Right to use a contract producer lien.
   D. Right to review contracts pursuant to Iowa Code.
   E. Right to disclose contract terms
   pursuant to Iowa Code.
2. Smithfield agrees that should any Iowa producer suffer damages as a result of Smithfield’s breach of their contract with the Iowa producer or as a result of Smithfield’s failure to provide or abide by any of the other provisions of the agreement, the Iowa producer can bring civil action for damages, including treble and punitive damages. In addition, if the Iowa producer prevails in the above-referenced civil action, Smithfield will be responsible for the producer’s costs and attorney fees in addition to any awarded damages.
3. Smithfield agrees to refrain from activities that include, but are not limited to:
   A. Taking actions to coerce, intimidate, retaliate against, or discriminate against producers that exercise or attempt to exercise their rights under the agreement including actions affecting execution, termination, extension or renewal of an agricultural contract; alter the quality, and/or quantity of delivery times of contract inputs; use the performance of any other contract grower as the basis for termination, cancellation, or renewal of a production contract or to negatively affect the grower’s compensation; require contract producers to make a capital investment in addition to the capital investment required by the Iowa producer’s production contract with Smithfield, unless fair and equitable compensation is paid to the producer in a manner the producer agrees to in writing.
4. Smithfield agrees that if Iowa producers organize or adopt a collective bargaining unit, Smithfield will not retaliate against such growers. Smithfield will refrain from any anti-trust or restraint-of-trade litigation against such growers and Smithfield agrees to negotiate in good faith with any such grower organization.
5. Smithfield agrees to fund and participate in an environmental program at Iowa State University that will train Smithfield’s Iowa producers in the best environmental practices. Funding levels are set at $100,000 per year.
6. Smithfield has agreed to continue to fund the Smithfield/Lueter Scholarship Fund at Iowa State University for an additional four years at $60,000 per year.
7. Smithfield agrees that it has even intention to keep its Iowa plants and its plant in Sioux Falls, SD in operation. Should said intentions change, Smithfield will provide 90 days notice to the Iowa Attorney General’s Office.
8. Smithfield agrees that for two years following the execution of this agreement 25% of the swine slaughtered at its Iowa facilities and in its plant in Sioux Falls, SD will be purchased from non-Smithfield sellers.