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Food distributors allege price manipulation in chicken firms

 

By JIM RUTLEDGE

CHICAGO, Ill. — Six months after being cleared by the U.S. Securities and Exchange Commission (SEC) of price fixing in a previous food fight, Tyson Foods and others are being challenged in a new legal fight – this time, over accusations of manipulating wholesale chicken prices – by the nation’s top food distributors.

Sysco Corp. and US Foods, which supply hundreds of thousands of foodservice customers, have filed a lawsuit against more than two dozen companies including Tyson, Pilgrim’s Pride Corp., Sanderson Farms, Inc., Perdue and Koch Foods, accusing the firms of inflating the price of wholesale chickens.

The lawsuit, filed in the U.S. District Court in the Northern District of Illinois, accuses the companies of submitting false and artificially inflated information about their production levels to Agri Stats, Ind., a subsidiary of pharmaceutical giant Eli Lilly, and the Georgia Dock, a weekly benchmark price list compiled by the state’s agriculture department. Agri Stats has also been named in the case.

The lengthy 131-page petition is the latest in a series of lawsuits and investigations targeting the country’s chicken industry, which produces 41 billion pounds of meat annually that feeds American and foreign consumers. This year, the USDA says the U.S. consumer is projected to consume 92.4 pounds per capita.

The complex lawsuit alleges the companies curbed chicken supplies as far back as 2008, by coordinating their flocks of breeding birds, with each company keeping tabs on its rivals' activity via Agri Stats. The service publishes operational information reported by the chicken companies, anonymously.

The food distributors claim chicken executives were able to glean the private information, details about competitors’ supplies, and adjust their own accordingly.

With regard to the Georgia Dock, Sysco and US Foods accuse the companies of inflating the price of wholesale chickens by manipulating the Dock’s index. The distributors say the chicken companies reported prices that kept the index higher than other measures of chicken pricing, including the one compiled by USDA.

During 2016, the Georgia Dock index’s value for wholesale chickens averaged about $1.11 a pound, or about 32 percent higher than similar pricing like the one used by the USDA, which averaged more than 27 cents less, at 84.55 cents a pound.

In late 2016, the Georgia Department of Agriculture (GDA) suspended the index after a number of poultry companies declined to submit documents confirming the accuracy of pricing data they supplied to compile the index.

US Foods claims that beginning in 2008, the chicken companies destroyed breeder hens that produced broiler chickens – chicks raised for meat consumption, that make up 98 percent of the chicken meat sold in the U.S. – valued about $22 billion-$33 billion annually over the past decade.

These coordinated cuts over time, the lawsuit said – which also included destroying eggs and exporting excess breeder flocks to Mexico – continued. By 2012, the food distributors claim, wholesale chicken prices jumped 50 percent.

Sysco and US Foods are the latest companies over the past several months to file lawsuits, joining others including restaurants and consumers making similar allegations against the chicken producers, alleging price manipulation. In Florida, the state’s attorney general is also investigating the issue.

Last August, the SEC cleared Tyson and 14 others including Perdue, Sanderson Farms, Foster Farms and Koch Foods of possible price fixing of broiler chickens, following a September 2016 lawsuit brought by Maplevale Farms of Falconer, N.Y. The company is a leading foodservice distributor to thousands of customers across Pennsylvania and parts of New York.

Julie McPeake, chief communication office for the GDA, said in an email to Farm World: “The department does not comment on pending litigation.” The Georgia Dock is not accused in the lawsuit, but is named for its role in recording chicken price data.

US Foods, Sysco, Perdue, Tyson, Pilgrim’s Pride, and Agri Stats all declined comment to emails from Farm World. Sysco Corp. is based in Houston, Texas, and US Foods Holding Corp. is in Rosemont, Ill.

The case document number is 1:18-cv-00702 in the U.S. District Court for the Northern Division of Illinois, the Eastern Division.

2/7/2018