October 4, 2011

Pilgrim's Pride manipulates chicken prices

Pilgrim's Pride Corp. was ordered to pay US$26 million in damages to contract poultry growers in Arkansas because of chicken prices manipulation, US Magistrate Judge Charles Everingham IV ruled Friday (Sep 30).

The judge said that the decision by Pilgrim's Pride in 2009 to shutter a chicken processing plant in El Dorado, Arkansas, was motivated by a desire to manipulate the price of chicken. In the ruling, the judge cited as evidence an internal email message from William Snyder, the company's chief restructuring officer, in which he wrote the company planned "to restrict the chicken in the area and allow prices to rise."

The company "expected that the idling of El Dorado would materially affect the national supply of commodity chicken and would result in an upward price adjustment," wrote Judge Everingham, in federal court in the Eastern District of Texas.

According to the ruling, the company essentially violated the Packers and Stockyards Act of 1921, which prohibits livestock companies from unfair and deceptive practices. The court ruled Pilgrim's wasn't guilty of other claims, including fraud and false representation.

Pilgrim's in 2008 filed for bankruptcy protection as it faced rising feed costs and a downturn in the poultry market. The Greeley, Colorado, company emerged from bankruptcy as Brazil-based meat company JBS S.A. took a majority stake in the company.

Friday's ruling focuses on the often-complicated relationship between chicken processors and the producers, or "growers," who raise the animals on which they depend. Growers often receive financial backing from processors to build and expand operations, and their businesses are often highly dependent on consistent business from a single processor.

The ruling specified a wide variety of financial damages for about 91 chicken growers. While some growers received less than US$50,000, the court awarded more than US$700,000 to other plaintiffs.

In the ruling, Judge Everingham wrote that the growers were adversely affected by the decision by Pilgrim's not to purchase from them and idle the Arkansas plant instead of sell it. He wrote there was some difficulty arriving at actual damages, in part because of some growers' "failure to keep and produce records" relating to their business and income.

"Although the court finds that these plaintiffs suffered damages in fact," the judge wrote, "the court has had more difficulty estimating the amount of their damages with reasonable certainty."

A spokesperson for Pilgrim's Pride did not immediately respond to a request for comment.