Why is Tyson maintaining its Cherokee lease?

Editor's Notebook


If Cherokee is frustrated with an empty meatpacking plant today, they will be more frustrated by carping about Tyson Foods’ apparent refusal to let go of its lease on the 42 acres just outside the city limits before 2020.

The Des Moines Sunday Register’s lead story last weekend detailed the complaints of city council members, retailers and the owner of the building who lives in New York. Many claim that Tyson is holding Cherokee “hostage” by not allowing direct competitors to occupy the building.

“I think it’s typical large-scale greed,” Councilman Chad Brown told The Register.

Or just sound business practice, maybe, as we practice business in America?


• Tyson is obliged by contract to lease the building until 2020.

• The landlord has been getting paid $130,000 per year by Tyson to rent the empty campus since the deli meat plant closed in 2014.

• Property taxes are getting paid.

• Of course Tyson doesn’t want to see Smithfield or Prestage Pork moving into Cherokee, although neither wants to. (Cherokee does not have the water capacity to operate a slaughter plant. The Dakota aquifer in Storm Lake and Cherokee already is at pumping capacity. Cherokee can handle the amount of water that the former Tyson plant consumed, and then a little bit more.)

• Tyson might be hanging onto that plant for a good reason that will benefit Cherokee.

The landlord from New York says it is unconscionable that Tyson leaves the town in a lurch. We have not heard him offer to drop the rent.

Nobody lashes the retailer in public when he closes down his shoe store and lays off two nice people, and then leaves the storefront empty for lack of interest. We all feel sorry for him, that he could not compete.

People make a sport out of bashing Tyson, although it is the largest employer in Iowa. Were it not for Tyson, Storm Lake would be half its size and all white. If you think that is a good thing, you had better hope somebody wants to put a casino here and you have a lucky number.

Tyson may make me look stupid someday. It’s not hard. But it occurred to me that Tyson may want to hold onto that property for awhile as it sorts out its own prospects in a global food industry that is evolving at mind-spinning speed.

Tyson just outbid Brazilian meatpacker JBS for Hillshire Brands. Meantime, the Storm Lake Hillshire turkey plant burned down as the company paid workers for a year not to work. The avian flu hit, cutting local turkey production in half. Tyson is just clearing those catastrophes off the books as turkey production hits full stride.

Tyson has enjoyed owning Hillshire for the past couple years. Company executives have acknowledged repeatedly in public statements that as they integrate Tyson and Hillshire supply chains and coordinate them with the product streams, profits will rise higher than they already have. That suggests that full integration has not occurred and questions remain.

Cherokee officials claim that Tyson wants to keep workers out of Cherokee to protect their Storm Lake labor market. We hate to disappoint, but Cherokee already is part of the Storm Lake labor market. It has been for 25 years. Tyson never had a problem finding employees for Storm Lake or Cherokee. Rembrandt Enterprises managed to ramp up to 250 employees while Tyson lurked 15 miles away. The meat industry in Sioux County also has grown steadily while Storm Lake, Rembrandt and Cherokee were humming away with largely imported labor. Prestage Farms will not staff its new Wright County plant with Storm Lakers. They will come from all over the world.

The claim about Storm Lake makes Cherokee sound like a spurned country cousin.

One of two things is more likely true:

• That the Cherokee plant was vacated, and after the Hillshire purchase, Tyson wanted to evaluate what its production needs, especially with Hillshire in the mix, would be over the next five years. I don’t think they have really figured that out yet, as Con Agra pulls out of Omaha, Cargill pulls out of beef and Prestage opens pork (and potentially turkey) operations in Wright County.

Cherokee is situated perfectly between Dakota City, Neb., and Storm Lake, where Tyson has major facilities. Its location recommends it as a further processing site for raw slaughtered products from nearby Storm Lake and Dakota City.

While Tyson ciphers, the United Food and Commercial Workers have dissipated. Cherokee was a union plant. Storm Lake is not. After awhile, the union would have to recertify, which is almost impossible today.

It holds real potential for cold storage at the intersection of two US highways and a major rail line.

• That Tyson will gladly quit writing a rent check when a solid offer comes through not involving a direct competitor in the meat industry.

Cherokee officials would spend their time better trying to figure out how to induce Tyson back into Cherokee than biting its ankles. We were willing to give Prestage $22 million to locate in Mason City. What if Cherokee and the State of Iowa offered Tyson $22 million to open up a further processing plant? Or, they could try to figure out what sort of business Tyson would like to see in that facility. Cherokee has been watching solid industry drift away to South Dakota right under its nose. Why not try to build something local that Tyson can’t refuse?

Here’s what Tyson spokesman Gary Mickelson told me:

“We share Cherokee’s interest in finding another business to use the plant and are working with the plant’s owner and local economic development officials to market the property. We hope another business can occupy it before our lease expires in 2020.

“We’re willing to entertain an offer from another company, including another food company, that’s also approved by the building owner. To-date, we have not received a fair offer to take over the lease or purchase the assets that were in the facility.

“We’ve worked with three food companies that have expressed interest in the property. Two decided it wouldn’t work for them, and one made an offer well below fair value. None of them were turned away by Tyson Foods for competitive reasons, as some have claimed.”

And this:

“We’re continually examining ways to meet the changing needs of our customers, but have not come across any viable opportunities to date that involve the Cherokee plant. It’s always possible that another company that does business with us might have interest in using the facility.”

Read into that all you would like.

But it makes as much sense to say that Tyson is holding onto the plant for its own means in its own time, as it does to say that Tyson is sitting on the Cherokee facility so nobody in Storm Lake can get a raise. In fact, the former seems more plausible.

If I were rooting against Cherokee I would hope they continue bad-mouthing their best hope. We’re all rooting for every rural community in Iowa. If Cherokee believes that Tyson is done with their town, then they should pull everything together to vault a local enterprise into the space it needs. Or, work with Tyson to find an ancillary food manufacturer that can make use of the building. That is a lot better bet than telling them to kiss you where the sun don’t shine. Any decent retailer or salesman could tell you that.