The US Department of Agriculture has initiated a probe of Tyson Foods after the company said earlier this week it would restructure its pork processing business.
The move would mean Tyson discontinuing its working relationship with 132 pork producers in a bid to streamline all of its pork processing division.
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 pork industry.
A so-called "rapid response team" consisting of about two or three investigators was sent to Tyson's headquarters in Springdale, Arkansas, earlier this week.
"We go in with no suspicions," noted 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 pork division were needed to more effectively position the group for the future. In addition to the discontinued relationships with the pork farmers, Tyson noted the restructuring would result in the elimination of about 200 jobs and the closure of company- owned and leased pork 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 (€20.5m) to $30 million, will reduce the total number of sows by 30 per cent 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. Tyson said when it released its fiscal third quarter results last month that it was mulling the fate of the live pork production business.