Big food and chicken: lawsuits claim that processors are working to fix bird prices.
Some major food companies have accused Big Chicken of colluding with Chicken prices in 10 years.
In just three weeks, two food retailers and two of the country’s largest food distribution companies have filed lawsuits against tyson foods, Perdue Farms, Pilgrim’s Pride, Koch Farms and Sanderson Farms.
The complaints allege that poultry companies have been involved in price-gouging schemes through information sharing software since 2008. So suppliers and retailers argue that they are paying too much for chicken — a burden that consumers may feel.
The $30 billion chicken market contains almost all the chicken consumed in the United States. Historically, the price of broilers has been boom-and-bust cycles – as chicken prices have risen, so has supply. So the price will go down. “Before 2008, the chicken price chart was like EKG,” former Perdue farmer Craig Watts said in an interview. But, as Mr Watts puts it, “for the last 10 years or so, it has been very prosperous.”
The plaintiffs in the lawsuits claim that chicken prices have suddenly stabilised and started to rise since 2008, even as the companies’ sales to farmers fell. The national association of chicken compiled by the United States department of agriculture, according to data from 2008 to 2014, chicken wholesale prices rose about 35 cents a pound, and then fell slightly, and between 2002 and 2008 chicken wholesale prices rose just 24 cents.
For poultry processors buy poultry chicken farmers and wholesalers are claimed that this stability is the result of collusion between firms – partly by a named Agri Stats database software, the software allows companies to see each other’s ‘data and coordinate pricing.
Some poultry companies have denied the allegations or declined to comment.
Through agricultural statistics, poultry companies can share information about production, bird size, financial returns, etc. The database company collects information from 95% of poultry processors and tracks 22 million birds a day. According to farmers, retailers and distributors, companies can use this information to set higher prices for all their products. In its 2017 agricultural statistics report, bloomberg found that tyson’s profit margin increased from 1.6 percent to 11.9 percent between 2009 and 2016. The profit margin between 2012 and 2015 rose from 3.8% to 12.77%, thanks to pilgrims’ pride.
The first lawsuit against processors was a class-action lawsuit filed by food wholesaler Maplevale Farms in September 2016. The prosecution alleges that, since 2008, tyson and pilgrims to coordinate efforts to reduce its chicken stock, although the input costs (mainly corn and soybean) in the same period fell 20% to about 20%, but poultry wholesale prices rose by 50% since 2008. “Maplevale claims to have paid a high price for chicken in a few years.
At the same time, the poultry processors were attacked in different directions. In a similar way, the farmers who raise chickens for the industry say they are using their market forces to change them in a short time.
A few farmers in February 2017 to tyson, pilgrim’s pride, Perdue, Koch, Sanderson et al, filed a class action lawsuit accused of these processors act as a cartel, and use the Agri Stats information to reduce farmers’ wages. In April 2017, a restaurant franchisor Chicken Kitchen for tyson foods also filed a similar lawsuit accused the company of “by limiting the production and to increase the us poultry prices, for the purpose of conspiracy to repair, maintain and poultry prices stable. “On January 12, chain supermarket WenDiKe west and south garden dew filed a lawsuit against the food, tyson, pilgrim’s pride, and others claimed that the processor in order to maintain high oil prices have limited supply. US Foods and Sysco follow suit on January 30.
The industry’s bold integration has led to accusations of anti-competitive behaviour. Tyson and Pilgrim’s Pride control 40% of the market alone. Sanderson Farms, Perdue and Koch Foods control another 20 percent.
Farmers have been struggling for years to reform contract poultry farming. More than 95% of chicken production in the United States is based on contracts. Contract poultry farmers are paid in opaque “competition systems” that compete with farmers for zero and pay structures. Many farmers say poultry companies use tournament systems to suppress farmers’ wages and limit the ability of farmers to move between processors.
Farmers have succeeded in getting the Obama administration’s agriculture department to adopt rules to address some of their concerns. But the resulting effort – known as the us department of agriculture’s “GIPSA rule” – is responsible for monitoring competition in the livestock sector, which was killed by the trump administration last October.
Law professor at university of Wisconsin, Madison, says Peter Carstensen, because the action is a private lawsuit, so they probably won’t structural reform of the poultry industry, they study the meat industry competition and regulation. He said the lawsuits may not have much impact on the “very serious problem” of how processors can be used to raise chickens. “
But “the first step in the collective bargaining power reform is to significantly change the type of information that agricultural statistics can provide to chicken processors,” he said. The lawsuits could lead to major changes in the severity of the alleged collusion between the public and regulatory authorities in the poultry processing sector.