Big food and chicken: the lawsuit claims processors are working to fix bird prices.
Some major food companies have accused Big Chicken of colluding with the price of Chicken for 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.
The complaints say poultry companies have been involved in price-gouging schemes through information-sharing software since 2008. So suppliers and retailers think they’re paying too much for chicken – a burden consumers may feel.
The $30 billion chicken market includes almost all the chicken consumed in the United States. Historically, broiler prices have been boom-and-bust cycles – as the price of chicken has risen, so has the supply. So the price will go down. “Before 2008, chicken price charts were like EKG,” Craig Watts, a former Perdue farmer, said in an interview. But, as Mr Watts puts it, “it has been very prosperous for the last 10 years or so.”
The plaintiffs in the lawsuit claim that chicken prices have suddenly stabilised and begun to rise since 2008, even as their sales to farmers have fallen. The national association of chicken by the U.S. department of agriculture, according to the 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, buying poultry chicken farmers and wholesalers claims that the stability is the result of collusion between businesses – partly by naming Agri Stats database software, the software allows companies to see each other’s ‘data and coordinate pricing.
Through agricultural statistics, poultry companies can share information about production, bird size, financial returns, etc. The database company collects information from 95 percent of poultry processors and tracks 22 million birds a day. According to farmers, retailers and dealers, companies can use this information to set higher prices for all their products. In his 2017 agriculture report, borg found that tyson’s margins rose from 1.6 per cent to 11.9 per cent between 2009 and 2016. Margins rose to 12.77 per cent between 2012 and 2015 from 3.8 per cent because of pilgrims’ pride.
The first lawsuit against processors was a class action lawsuit filed in September 2016 by Maplevale Farms, a food wholesaler. Prosecutors claimed that since 2008, tyson chicken and pilgrims to coordinate efforts to reduce inventory, although the input costs (mainly corn and soybean)) fell 20% to about 20%, but poultry wholesale prices have risen 50% since 2008. “Maplevale claims to have paid a high price for chicken in a few years.
Meanwhile, poultry processors have come under attack in different directions. In a similar way, farmers who raise chickens for the industry say they are using market forces to change them in the short term.
In February 2017, some farmers to tyson, pilgrim’s pride, Perdue, Koch, Sanderson people filed a class action, such as charges of these processing act as a cartel, and use the Agri Stats information to reduce the salary of farmers. In April 2017, a food franchisee Chicken Kitchen for tyson foods filed a similar lawsuit accused the company of “by limiting the production and increase the U.S. poultry prices, the purpose is to seek to repair, to maintain price stability and poultry. “On January 12th, Wendy’s, south garden dew, a supermarket chain, filed a lawsuit. Tyson, pilgrim’s pride and others claim that processors have limited supplies to maintain high oil prices. U.S. food and Sysco followed up January 30.
Bold consolidation in the industry has led to accusations of anti-competitive behaviour. Tyson and Pilgrim’s Pride control just 40% of the market. Sanderson, Perdue and Koch Foods control another 20%.
For years, farmers have been trying to reform contract poultry farming. More than 95 percent of U.S. chicken production is based on contracts. Contract poultry farmers are paid through opaque “competition systems” that compete with farmers for a zero-sum payment structure. Many farmers say poultry companies use the tournament system to restrain farmers’ wages and limit their ability 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 usda’s “GIPSA rule” — is responsible for monitoring competition in the livestock sector, which was killed by the trump administration in October.
Law professor at university of Wisconsin, Madison, Peter Tom kristensen says, because of this action is a private lawsuit, so they may not be on the poultry industry structure reform, they study the meat industry competition and regulation. He said the lawsuit could have little impact on the “very serious problem” of how processors use chickens. ”
But “the first step in collective bargaining reform is to significantly change the types of information that agricultural statistics can provide to chicken processors,” he said. These lawsuits could lead to significant changes in the extent of collusion between public and regulatory authorities in poultry processing.