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Lawmakers want scrutiny of pork producer merger
Herseth asks Justice Department to investigate deal

By Kevin Dobbs
kdobbs@argusleader.com
Published: March 10, 2007

Lawmakers from South Dakota and other farm states are making a final push to influence an antitrust investigation that could halt the merger of the nation's two largest pork producers, a deal that critics say would hasten the consolidation of livestock markets and inflate food prices for consumers.

Rep. Stephanie Herseth, D-S.D., wrote a letter this week to U.S. Attorney General Alberto Gonzales outlining her concerns about Virginia-based Smithfield Foods' plans for an $800 million buyout of its Kansas City, Mo., rival, Premium Standard Farms.

Smithfield, parent of John Morrell & Co. in Sioux Falls, expects to close the deal before April 30, a move that would give it control of about a quarter of the U.S. pork market. Herseth and others warn that could give the company too much control and limit independent hog producers' options and ability to get good prices for their meat.

"Smithfield has a history of constricting hog processing capacity in the Midwest by purchasing and closing swine processing plants in the region," Herseth wrote.

In recent years, she said, Smithfield has established the pattern with closings in Huron, Kansas City and Dubuque, Iowa. The company also this year laid off more than 400 workers at its Morrell plant in Sioux City, Iowa. "I have concerns that this merger may lead to a further round of hog facility closures," Herseth said.

Smithfield executives have declined to be interviewed at length about the deal. And there has been no official word from the Justice Department.

But spokesman Jerry Hostetter said Smithfield anticipates getting regulatory approval in time to close the Premium Standard deal by the end of April.

South Dakota's congressional delegation joined Iowa's senators in calling for the antitrust investigation after the deal was announced last fall. The Justice Department could block the merger or require that Smithfield sell off some of its other holdings to comply with federal regulations.

But Wall Street analysts and lawmakers on both sides of the aisle say the Justice Department has all but quit the antitrust enforcement business, making the deal a near certainty.

"When large buyers merge, that means less competition for the farmers' product," Sen. John Thune, R-S.D., said this week. "The Department of Justice needs to rigorously scrutinize these mergers. If they don't, Congress should rigorously scrutinize the Department of Justice and find out why they aren't diligently promoting competitive markets."

Sen. Chuck Grassley, R-Iowa, issued a statement to the Senate Judiciary Committee, saying it "needs to do more in its oversight efforts with respect to whether the Justice Department" is active enough on the antitrust front.

Smithfield's buyout plan has been closely watched in Sioux Falls because the firm last year halted a $100 million expansion at its Morrell plant here. Officials said they could call off the project or revive it, but not until the Premium Standard deal was closed.

Hostetter stands by that. "We will not have a statement regarding the Sioux Falls expansion until after we close this deal."

Reach Kevin Dobbs at 331-2308.