Chicken Collusion: Tyson Announces SEC Investigating its Poultry Pricing

In a regulatory filing, Tyson Foods Inc. has stated that the Securities and Exchange Commission is launching an investigation into its chicken-pricing practices. Tyson, largest meat company in the U.S. in terms of sales, announced that it is cooperating with the investigation and plans on contesting the charges. Spokespeople for other poultry producers, including Pilgrim’s Pride Corp. and Sanderson Farms Inc. say that their companies also plan on fighting any allegations, although Pilgrim’s Pride declared that it has not received a similar subpoena to Tyson. SEC representatives have thus far declined to comment.

The investigation concerns artificial inflation of the Georgia Dock, which is an index created by the Georgia Department of Agriculture and widely used to determine poultry prices. The index is calculated only by using data from chicken companies and has been routinely higher than other benchmarks. The SEC contends Tyson has played a role in increasing this index so it can charge a higher than real market price. A report from Seeking Alpha claims producers’ collusion has cost consumers $3 billion annually. If true, the Georgia Dock manipulation would be similar to 2012’s LIBOR-rigging scandal.

Tyson’s CEO Mark Hayes has stated that Tyson does not expect to see any changes in profitability now that the index has been suspended and will not change its pricing strategy in response to the suit. The poultry producer has also announced that it has upgraded its profit projections for 2017 largely due to increased demand for beef and pork.

For more, read The Wall Street Journal‘s article or Seeking Alpha’s report.

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