Pilgrim’s Pride CEO, Three Other Executives Indicted For Price Fixing; Poultry Stocks Plunge

Via Zerohedge

One month after news that attorneys general for 11 Midwestern states urged the Justice Department on Tuesday to pursue a federal probe into potential price-fixing by US meat producers during the coronavirus pandemic, just after noon on Wednesday poultry stocks plunged on news the DOJ filed its first charges in an ongoing criminal antitrust probe accousing the CEO of Pilgrim’s Pride, one of the country’s biggest chicken producers, along with three other industry executives were indicted of allegedly conspiring to fix prices on chickens sold to restaurants and grocery stores.

The one-count indictment, returned by a federal grand jury in Colorado, allege current and former senior executives at Pilgrim’s Pride and Claxton Poultry Farms fixed prices and rigged bids from 2012 to 2017.

Colorado-based Pilgrim’s is the nation’s second largest producer, and according to wire reports, its CEO Penn was charged, as was a former Pilgrim’s vice president, Roger Austin. The president of Georgia-based Claxton, Mikell Fries, and a vice president, Scott Brady, were also indicted according to the Journal.

Pilgrim’s represents about 17% of the U.S. market, according to Watt, and the company estimates it produces about 13 billion pounds of chicken annually. Claxton, based in Georgia, estimates that it produces about 300 million pounds of chicken a year.

Collusion accusations have shadowed the $65 billion U.S. chicken industry since late 2016, when restaurant companies and other poultry buyers sued major poultry producers, accusing them of illegally coordinating operations to inflate prices. The chicken companies, including Tyson Foods Inc., Pilgrim’s Pride, Sanderson Farms Inc. and Perdue Farms Inc., have denied those allegations.

Similar price-fixing lawsuits since then have been filed against chicken companies by some of the biggest sellers of food, including supermarket giants Walmart Inc., Kroger Co. and Albertsons Cos., as well as restaurant suppliers Sysco Corp. and US Foods Holding Corp., which supply meat to hundreds of thousands of food service customers.

The DOJ’s probe into chicken pricing emerged last year when government attorneys sought to intervene in that ongoing litigation, seeking evidence from plaintiffs’ attorneys and requesting a pause on further evidence-gathering to protect a grand jury’s investigation. The Justice Department later issued subpoenas to Tyson, Pilgrim’s, Sanderson and other poultry producers. The companies said they would cooperate with the government’s requests.

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Ironically, in the context of some other prices, poultry price increase have been rather tame: wholesale chicken prices climbed just 11% from mid-2012, when the U.S. Department of Agriculture began calculating national prices for whole chickens, until the end of 2018. Then chicken prices fell about 27% from the start of 2019 through the end of February 2020 as chicken companies ramped up production and expanded plants, anticipating bigger exports after new trade deals were finalized.

The chicken industry is dominated by a handful of companies after decades of consolidation. The five largest companies control 61% of U.S. chicken production, according to Watt Global Media, an industry publication. Tyson, the largest, represents 21%.

News of the probe sent shares of poultry producers tumbling, with Pilgrim’s Pride plunging to two-month lows.