Opinion: Are the U.S. chicken and pork industries rigged?

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Have you ever wondered why all the gasoline stations in your neighborhood more often than not are selling fuel at the exact same price?

A few summers ago I was traveling through Michigan when I needed gas.  I pulled into a Mom-and-Pop and filled up for $1.91 a gallon which I thought was a good price given a few stations I passed with gas over two bucks.

As I went inside to pay I overheard this conversation on the phone from what turned out was the station owner:

“… well Shell was one-ninety-one yesterday … same at BP … you got Shell and BP at two-oh-three … OK thanks.”

The owner immediately flipped the signs and pumps over to $2.03.  Noting what must had been a rather shocked look on my face – and yes I was wondering what I would pay – he says to me, “Don’t worry.  You get $1.91.”

Well … the moral of the story is the behavior and pricing decisions of your competitors does impact your own pricing decisions.  Anyone who says different is not dealing in reality.

Now that was at the retail level…imagine if corporations knew detailed information about their competitors at the wholesale or production levels?

Pick an agricultural industry.  Say chicken.

What if the nation’s biggest poultry producers – including Tyson, and Sanderson Farms – have detailed granular data on their competitors product mixes including which yield the highest price per pound? How about the caloric breakdown of feed used in each plant?  What if you knew your rival last month made a larger profit selling breast meat than wings?

Well…you don’t have to imagine it because the chicken industry is  sharing what once was considered proprietary information with one another through a service called Agri Stats.

If you are a poultry processor chances are you have a subscription to Agri Stats, a private service that  aggregates data  from poultry companies weekly and then prepares confidential reports which it shares with all its clients.  Agri Stats claims to have granular data from more than 95 percent of U.S. poultry processors.

If you are NOT a poultry processor, Agri Stats isn’t going to let you subscribe.

If you think this sounds like collusion you are not alone.

In September 2016, Minneapolis-based law firm Lockridge Grindal Nauen filed a class-action lawsuit in federal district court on behalf of Maplevale Farms and other wholesalers who say the nation’s largest poultry processors are colluding with one another to set chicken prices.

The lawsuit makes for some interesting reading:

Beginning at least as early as January 2008 Defendants conspired and combined to fix, raise, maintain, and stabilize the price of Broilers. The principal (but not exclusive) method by which Defendants implemented and executed their conspiracy was by coordinating their output and limiting production with the intent and expected result of increasing prices of Broilers in the United States. In furtherance of their conspiracy, Defendants exchanged detailed, competitively sensitive, and closely-guarded non-public information about prices, capacity, sales volume, and demand, including through third party co-conspirator Agri Stats. Plaintiff is further informed and believes that Defendants fraudulently concealed their anticompetitive conduct from Plaintiff and the Class in furtherance of the conspiracy.”

 The lawsuit has since been broadened to include the retail level.

If the lawsuit is successful, poultry producers will be on the hook for billions (yeah, with a b) of dollars in damages and fines. Needless to say, poultry producers have bonded together in protest and have filled a joint motion to dismiss the lawsuit.

That didn’t work.  Last November, U.S. District Judge Thomas Durkin denied the chicken producers’ motion saying the bulk of the lawsuit can proceed to discovery.

Who knows what Maplevale Farms and the rest of the plaintiffs will discover after detailed examination of internal Agri Stats communications and reports.

And oh yes … a similar lawsuit was filed against pork producers and Agri Stats late last month.

On the face of it appears the chicken industry is rigged dear shopper.  And maybe the pork industry to boot.

Agri Stats says it is not violating antitrust laws because the information it provides is historical (although we certainly can debate whether week old data is “historical.”)

But the truth of the matter is that historical data is an excellent method to make future production and pricing decisions – especially if you know for all practical purposes what the entire industry is doing. Competition is stifled and the industry moves in lock (goose?) step.  Here’s hoping the courts shine  some transparency on Agri Stats and the poultry and pork industries for the sake of U. S. consumers.

 

About Dave Dickey

Dave Dickey

Dickey spent nearly 30 years at University of Illinois at Urbana-Champaign’s NPR member station WILL-AM 580 where he won a dozen Associated Press awards for his reporting. For 13 years, he directed Illinois Public Media’s agriculture programming. His weekly column for Big Ag Watch covers agriculture and related issues including politics, government, environment and labor. Email him at dave.dickey@investigatemidwest.org.

This column reflects the writer’s own opinions and not those of Big Ag Watch.

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