By DOUG SCHMITZ
Iowa Correspondent

DES MOINES, Iowa — When Smithfield Foods, Inc. announced last month that its 51 year-old John Morrell & Co. meatpacking plant in Sioux City would close its doors on April 20, Gov. Chet Culver made an unprecedented and controversial move for its immediate acquisition, which raised the suspicions of current and former Iowa officials.

“My administration had been in communication with Smithfield, and we were prepared and ready to work with them on ways to bring new investment into the plant,” Culver said. “Unfortunately, as a result of this national economic recession, Smithfield executives made the decision to close this facility.”

Culver Chief of Staff John Frew said Sioux City lawmakers approached him about options for buying the 51-year old plant, which would then be razed for redevelopment.

But former governor Terry Branstad, who’s running against Culver for his old post this fall, said Culver’s lack of involvement in the state’s economic development likely led to the Sioux City plant’s closing, which was announced on Jan. 20.

“I would work very closely with the local economic development people,” Branstad told supporters gathered at the Sioux City Public Library on Jan. 28. “I would talk directly to the company and find out what their problems are and if there are burdens or restrictions that the state has that can be lifted or things that can be done to make Iowa more attractive.”

While Iowa Agriculture Secretary Bill Northey said he was open to preliminary talks with government officials, he advised that the state should not purchase the Sioux City pork processor, a decision that should be left up to private investors.

“We’ve got to find private investors that are willing to do this,” he said during a taping of Iowa Public Television’s Iowa Press. “This is a business decision; this isn’t something to be owned by us.”
As the nation’s leading hog state, Iowa produces around $20 billion per year in farm commodities, half of which is livestock.

“We’d love to see new processing, but we’re not seeing growth in processing around the country,” Northey said. “We’re concerned about the processing capacity.”

According to the National Pork Producers Council in Des Moines, pork producers have lost an average of about $23 per pig since September 2007, and as much as $40 to $50, as rising production costs failed to keep up with market prices.

A subsidiary of Smithfield Foods, Inc. in Smithfield, Va., John Morrell’s Sioux City plant – one of the city’s largest employers – slaughters hogs, and produces boneless loins and other fresh pork products.

“We deeply regret having to close this facility,” said Joseph Sebring, president of John Morrell. “We recognize that layoffs and plant closings are difficult for everyone concerned.

“But at the same time, we believe this is a necessary business decision,” he said. “The Sioux City plant is one of the oldest, most outdated and least efficient plants in the Smithfield system.”
Sebring said the company would comply with the federal Worker Adjustment and Retraining Notification Act (WARN), which provides employees with a 90-day notification of the plant closing, which would affect about 1,450 workers.

Under WARN, the company would also be required to immediately notify state employees of dislocated worker assistance.

“The consistent quality of our products is extremely important and is a daily priority,” Sebring said. “We are constantly improving our facilities and equipment to ensure a safer, higher-quality product.
“In this case, the Sioux City plant was constructed in 1959 and would require significant capital expenditures to outfit it with the next generation of pork processing technology. In this adverse business environment, those capital needs simply cannot be met,” he said.

What’s more, Sebring said, the Sioux City plant design, layout and footprint severely limit the operating and sales flexibility, as well as the plant’s ability to “produce value-added packaged meat products and maximize production throughout.”

“The refrigeration system is antiquated and inefficient, and the plant lacks any significant refrigerated storage space,” he added.
Currently, Smithfield operates three other plants, located in Sioux Falls, S.D., Denison, Iowa and Crete, Neb., which have the capacity to partially absorb the number of hogs that are currently being processed at Sioux City. The company said it would transfer some of the Sioux City production to those plants in the near future.
In the interim, the company also said it would honor all production contracts at Sioux City and that Smithfield has no further plans for plant closures in the foreseeable future.

With sales of $12 billion, Smithfield Foods is the leading processor and marketer of fresh pork and packaged meats in the United States, as well as the largest hog-producing company.