Ditch the Georgia Dock?
Nov. 17, 2016
by Erica Shaffer
Search for similar articles by keyword: [Chicken
In a memo, the Georgia Dept. of Agriculture’s public affairs director expresses major concerns about the validity of pricing information.
KANSAS CITY, Mo. – An internal memo from the agency responsible for compiling and publishing the Georgia Poultry Market News (PMN), also known as the “Georgia Dock,” casts doubts on the validity of the poultry pricing information contained in the report.
In a redacted memo, which was first reported by The Washington Post, Arty Schronce, public affairs director for the Georgia Dept. of Agriculture (GDA), expressed serious misgivings about the Georgia Dock, which he called “a flawed product that is a liability to the Georgia Department of Agriculture.”
The Georgia Dock is a leading wholesale chicken price index compiled from a survey of poultry processors operating in the state. It’s an important benchmark because its sets poultry prices for roughly 25 percent of the chicken market in the United States, according to Seeking Alpha. Producers, processors, distributors, fast food operators, chain store buyers and other stakeholders in the food industry use the index. The National Chicken Council (NCC) noted that the Georgia Dock is one of several indexes that poultry buyers and sellers use.
“Using the Georgia Dock — or any other index — is entirely voluntary,” NCC said in a statement. “No one is required to use the Georgia Dock, but many companies on both sides of the transactions have found it to be an effective way to start negotiating the price for chicken. So, only the buyers and sellers know the real transacted price. Implying that the Georgia Dock price is blindly accepted without any adjustment is very far from the actual situation.”
NCC went on to say that “One of the key points is the difference between Urner Barry, for example, and the Georgia dock is that the former is based on spot pricing and the latter is primarily based on long-term contracts where supply is guaranteed, thus the differential. Further, the small birds reported by the Georgia Dock are consistently the most costly to produce based on weight categories and therefore tend to be consistently the size category receiving the highest price.
“Importantly, no matter what the Georgia Dock or any other price index says, chicken will only sell for the price the individual buyer and seller are willing to pay for it.”
But the validity of the data submitted by the processors, according to Schronce, has been compromised by inexperience and declining subject-matter knowledge within the department in addition to potentially inaccurate information supplied by some processors.
“I was told that poultry companies know what they are doing and all I need to do is gather and consolidate the info I am provided,” he wrote. “However, I have come to question the validity of some of the information provided.”
In response to concerns about the validity of the Georgia Dock, the US Dept. of Agriculture stopped including the Georgia Dock in its market news reports in August. The Georgia Dock has been trending higher than the USDA, Urner Barry and other indices. There is no independent verification provided.
Schronce said some companies are reporting accurate information, but other companies appear to have stopped participating in the price reporting. He said of one company “…They seem to deliberately submit a low bid that they know will be kicked out. However, they can claim that they are submitting something lower. In essence, they take advantage of high whole bird prices while maintaining that they want it to be lower.”
In response to questions about the validity of the Georgia Dock, Tyson Foods Inc. said in a statement to MEAT+POULTRY: “The prices reported by the Georgia Dock are determined by the state of Georgia, not Tyson Foods. When the Georgia Department of Agriculture asks us for pricing data, we provide accurate information based on actual and recent transactions. We do not see the prices reported by our competitors to the Georgia Department of Agriculture.
“We negotiate many different sales contracts with customers, however, only a small portion of our chicken products are sold under contracts with ties to the Georgia Dock,” Tyson Foods said.
Tyson Foods, along with Koch Foods, Perdue Farms and several other major poultry processors, faces an antitrust lawsuit which has spurred several class action lawsuits filed on behalf of shareholders in the publicly traded companies named in the antitrust complaint. Tyson Foods has publicly denied any wrongdoing.
Schronce noted the increased scrutiny of the Georgia Dock by the media, the public and legal authorities. He said he was contacted by representatives of the antitrust division of the Florida Attorney General’s Office.
In his memo, Schronce also tells a tale of turnover within the agency and at the poultry companies, which created a void in experience and knowledge about markets, prices and the poultry industry. He even acknowledged his own inexperience with handling the Georgia Dock.
“My training was inadequate, inconsistent and sometimes in error,” he wrote. “A former employee who had retired many years ago was brought in to teach me. His attendance was sporadic at best. The only thing consistent about his instruction was that the PMN needed at least two more people and everything needed to be done the way it was 20 years earlier.
“He was unwilling to accept that both poultry companies and the Georgia Poultry Market News had changed.”
Schronce also noted “diminished knowledge, experience and concern” among the processors who were tasked with providing pricing information. Schronce said he “…often received lackadaisical and rude responses to my requests for information. (i.e. “just keep ‘em the same,” “hurry up, hurry up,” and unreturned phone calls.)”
In other cases, turnover at the processing companies was a problem. “Someone was laid off and no one was trained to take that person’s place,” Schronce wrote. “The replacement is not as knowledgeable or reliable. On one occasion, the replacement has been replaced…”
In concluding his memo, Schronce’s recommendations were:
Shut down the PMN.
Transfer the PMN to the Georgia Poultry Federation
Discontinue PMN except for the whole bird dock price.
“Let this also be handled by the Georgia Poultry Federation or an independent entity,” Schronce wrote.
Index under review
Julie McPeake, chief communication officer with the GDA, said in a statement the agency has been reviewing the Georgia Dock for nearly a year. But the concerns detailed by Schronce were only recently brought to the agency’s attention, “… and have certainly heightened our awareness and haste moving forward,” she said.
“Our recent review and evaluation of the program has highlighted areas where we seek to improve our reporting standards, but the necessity remains for a report that is representative of the poultry marketplace,” McPeake explained. “We are currently vetting a new process with third-party sources that seeks to continue the reporting of statistical information representing the contract market for poultry in a manner that yields informative and transparent reports that are useful to all.
“Given that poultry is Georgia’s number one industry, with a $25.5 billion economic contribution and responsible for 103,000 jobs, it is important that any changes we make to the index is fully researched moving forward.”