Poultry price fixing story stems from investors' investigation - Entrepreneur Generations

In February several grocery retailers and the country's two biggest food distribution companies filed suit against a slew of poultry companies like Tyson Foods and Perdue Farms, accusing them of colluding to fix the price of broiler chickens over a 10-year period. It's the third lawsuit in less than two years alleging poultry price fixing, and a fascinating new story from NPR explains how the story leaked in the first place.

In 2016, some Wall Street hedge fund investors had bet a lot of money that the stocks of chicken companies (along with the price of chicken) would fall, but the stock prices and chicken prices remained high, Dan Charles reports for NPR. The investors wondered if chicken companies were keeping chicken prices artificially high, and hired a lawyer to investigate.

The lawyer discovered that many big buyers of chicken, such as supermarkets and big chain restaurants, were using the Georgia Department of Agriculture's chicken price index to set their prices, since Georgia is the nation's leading poultry producer. A Georgia Agriculture Department employee named Arty Schronce was in charge of compiling the index. He called big chicken companies like Tyson each week and asked how much they were selling chickens and chicken parts for, then sent out the index in a newsletter. But the hedge fund lawyer noticed that Schronce's numbers were too high--sometimes 30 percent to 50 percent higher than other indexes, Charles reports.

Then the lawyer found a memo Schronce had written to himself, saying he didn't believe his own index anymore. There was no protocol in place to make sure chicken was actually selling at the price the poultry producers quoted. "Within a day of the lawyer getting that memo, it's been passed on to The Washington Post," Charles reports. "When it's published, it destroys the reputation of that price index. Georgia stops publishing it. Which is what Artie Schronce had proposed in his memo; it just took some short-selling Wall Street guys to make it happen."

Chicken prices still didn't fall after chicken buyers stopped using the index though, which is part of the reason for the current lawsuit: chicken buyers say poultry producers had fixed the prices and somehow still are.

from The Rural Blog https://ift.tt/2IpLj8n Poultry price fixing story stems from investors' investigation - Entrepreneur Generations

Posted by Entrepreneur Generations

Tweet