Criminal indictments were announced against four executives at two of the largest poultry processing companies in the country last week. Friday, Jayson Penn the CEO of Pilgrim's Pride pleaded not guilty to the price-fixing charges. The same day the Justice Department issued subpoenas against the four largest beef processing and meat packing outfits.
For many farmers and ranchers the news is welcomed and signals a resolution that is long overdue.
“The guys in the middle are bleeding both producers and consumers,” said Peter Carstensen, a former DOJ lawyer and emeritus University of Wisconsin law professor.
He was speaking of the poultry industry in general. News of indictments didn’t come as a surprise. Carstensen was hearing and seeing evidence of it five to 10 years ago even before a 2016 civil suit alleging illegal collusion.
That ongoing civil lawsuit says many of the big chicken producers, including the ones that had its employees indicted last week, use a third-party platform called “Agri Stats” to share the most intimate business practices like farmer pay and chicken production. Farmers and wholesalers say it allows them to suppress supply and inflate prices.
“Economists that I knew were saying, ‘What's going on here? How can they exchange this kind of information? That doesn't seem legal?’ Carstensen said. “I'd say ‘No, it doesn't seem legal to me.’”
A handful of companies control 90% of the chicken supply in this country. Even the ability to push the price up a few pennies is significant money.
“It literally comes up into the billions when you start taking it over several years,” said Carstensen.
Last week’s criminal indictment has a dearth of text message conversations of what to charge certain customers and even how to punish a company that isn’t going along. Unusually it doesn’t name the companies, just the individual executives. Tyson, which wasn’t listed in the broiler chicken indictment, has reportedly made a deal to work with authorities as a cooperating witness against some of its own employees.
Penn along with Roger Austin work for Pilgrim’s Pride. Mikell Fries and Scott Brady work for Claxon Chicken. The indictment labels another four unnamed suppliers and indicates the conspiracy bleeds into Colorado's state government — where Pilgrim’s Pride’s headquarters is located.
Whether or not the beef industry will see similar criminal proceedings is a question mark. Many ranchers think they should.
“While producers have been receiving depressed prices, causing many of them to exit the industry, at the same time the meat Packers have been earning record margins and consumers are paying record prices,” said Bill Bullard with Bill Bullard with rancher association R-CALF, which represents more than 5,000 farms across 43 states.
He and other producer representatives sued the big four beef packers: JBS, Cargill, Tyson, National Beef Packing Company — The same four the DOJ subpoenaed along with others. He says they have been manipulating prices since at least 2015, and violating multiple anti-trust and other federal laws.
“We are in effect enforcing federal statutes that we were unable to get either Congress or the administration to enforce on their own,” he said
“I think the cattle/beef industry is more complex than this makes it seem,” said David Anderson, an agricultural economist and professor at Texas A&M University.
Anderson said the prices are lower for ranchers because they increased supply through 2014 to capture the then high price following the historic 2011-2013 droughts and herd sell off.
Anderson points to periodic studies the past few decades that have shown small impact on prices from processors’ market power.
But he doesn’t argue about the incredible consolidation in the beef processing industry.
“85% of the fed cattle are, you know, go through meatpacking plants owned by those big four firms,” he said
He says concern about how meat packers depress producer price goes back to the 1800s. Historically there hasn’t been a lot of interest in breaking up big cattle companies though.
“The last time we've probably done that...” he paused. “I keep looking off into the sky thinking about when that was. Before my time, I would probably say,” he said laughing.
The tightening of the food supply chain in protein has pushed the issue to the fore though. A fire last year at a Tyson plant in Kansas — one of its largest — was followed by the slowing at plants where people are getting sick with COVID-19.
“The food supply chain is breaking,” said John H. Tyson, chairman of the Tyson Foods Board in an advertisement on April 27.
President Donald Trump — who took weeks to take any similar action regarding masks, ventilators, or other personal protective gear — used the Defense Authorization Act to classify meat packing plants “essential infrastructure” that should remain open the next day.
The bottlenecked industry on display, the price hitting American pocketbooks during a time of mass unemployment has given wind to the sails of ranchers.
“This has amped up the pressure to get the Justice Department involved to move this investigation forward quicker,“ said Anderson.
The question remains will this ultimately address allegations going back more than a decade in some cases?