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Price-fixing allegations hit chicken industry

Leaked memo from Georgia Department of Agriculture shows internal concerns about validity.

The chicken price at many grocery stores is based on a single weekly estimate known as the “Georgia Dock,” but a new leaked memo from the Georgia Department of Agriculture (GDA) suggesting the weekly may not be accurate is adding to growing concerns of the data’s validity.

The Georgia Dock is calculated by GDA and based on reports from eight anonymous chicken companies within the state. Public records show Pilgrim’s Pride and Tyson control about half of the 18 contributing plants. These processors are asked the amount of chicken parts they’ve sold and at what price, but the numbers do not receive independent verification. The price is then often used to determine contracts between chicken producers and supermarkets. As such, the prices can result in higher or lower prices for consumers.

The U.S. Department of Agriculture stopped publishing the weekly estimate a couple months ago. A USDA spokesperson told the Washington Post the agency discontinued publishing the Georgia Dock price “when data from the source report could not be independently verified.”

The Georgia Dock price has significantly shifted apart from other chicken price averages, rising roughly 20% out of line with a separate index maintained by the USDA, the Post reported, suggesting the deviation may have cost U.S. grocery consumers billions of dollars extra.

A newly leaked memo written by GDA’s Arty Schronce is shedding some light on internal concerns about the accuracy of the Georgia Dock report, as well. Schronce, who produces the Poultry Market News (PMN) report that contains whole bird chicken prices, called the PMN a “flawed product that is a liability to the Georgia Department of Agriculture” and said it is time to reeavaluate and examine the product, with the possibility of even eliminating it.

Schronce cited staff shortages and decreased knowledge and experience not only within the GDA office but also within the chicken production companies as a main concern. He called his own training for reporting the news “inadequate, inconsistent and sometime in error.”

From the chicken producers, Schronce said he often received “lackadaisical and rude” responses to his requests, including suggestions to keep the prices the same or unreturned phone calls.

“In spite of these changes, people still look at the PMN as if it is the same as it was 20 years ago. Clearly, it is not,” he said.

Schronce went as far to say that he questions the validity of some of the information provided.

“Some companies appear to be riding on the coattails of other companies. That is to say that the companies that are provide accurate and valid information are keeping the PMN figures reasonable and explainable,” he said. “As an example, I do not think I am getting actual weighted average prices from some companies.”

The Wall Street Journal published a story this past spring raising concern about possible Georgia Dock discrepancies. After the story, one of the major reporting companies stopped participating in the PMN and would not provide a reason. Schronce said that company doesn’t bear any responsibility now and is “not in danger of having company figures and strategy made public.” However, he said he wouldn’t be surprised if the company is still utilizing the PMN.

Schronce suggested possible solutions including shutting down the PMN, transferring the responsibility to the Georgia Poultry Federation where economists and an independent auditor could report the numbers or discontinue the PMN except for the whole bird dock price, which could also be handled by the Georgia Poultry Federation.

Two different class action lawsuits have been filed against the major poultry companies saying they have conspired to fix and raise prices of broiler chickens over the past 8 years.

Company responses

A spokesperson for Tyson Foods told Feedstuffs that the prices reported by the Georgia Dock are determined by the state of Georgia, not by Tyson Foods.

“When the Georgia Department of Agriculture asks us for pricing data, we provide accurate information based on actual and recent transactions. We do not see the prices reported by our competitors to the Georgia Department of Agriculture,” the company spokesperson said.

The spokesperson said the company negotiates many different sales contracts with customers, but added only a small portion of its chicken products are sold under contracts with ties to the Georgia Dock.

A Pilgrim’s Pride spokesperson said that less than 5% of the company’s current sales are tied to the Georgia Dock pricing index.

“We offer our customers a number of different price discovery mechanisms, including contracts based on cost of production and grain indexes,” the spokesperson told Feedstuffs. “ Importantly, Pilgrim’s diversified business activities in retail, foodservice, prepared foods and export markets, as well as differentiated product offerings, including antibiotic-free, veg-fed and organic products less dependent on commodity pricing, dilutes the importance of any one pricing index on our business, including the Georgia Dock.”

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