Poultry processors face lawsuit over grower pay
Feb. 3, 2017
by Erica Shaffer
The complaint alleges that top processors colluded in suppression of farmers' compensation.
KANSAS CITY, Mo. – A group of poultry growers accused leading US poultry processors of conspiring to suppress compensation paid to farmers, according to a class action lawsuit filed in US District Court, Eastern District of Oklahoma. Tyson Foods Inc., Pilgrim’s Pride Corp., Perdue Farms Inc., Koch Foods Inc. and Sanderson Farms Inc. and subsidiaries of those companies, were named as defendants in the lawsuit.
Referring to the poultry processors as “the Cartel” the complaint alleges that the companies agreed to share detailed data on grower compensation with one another with the intention of depressing grower compensation below competitive levels.
“By disclosing their highly sensitive and confidential compensation rates to each other, they eliminated competition and drove down farmer compensation,” court documents state. “By sharing this information on a frequent and contemporaneous basis, the Cartel has been able to keep farmer compensation lower than it would have been in a competitive market, and to keep the increased profits for themselves. This illegal information exchange drove down base farmer compensation nationwide.”
The complaint further alleges that poultry processors agreed not to solicit or hire farmers from other poultry companies. “By agreeing not to compete for the services of one another’s farmers, the Cartel attempted to insulate itself from normal competitive pressures that could potentially erode the effects of their information sharing agreement,” according to court documents. “This illegal ‘no poach’ agreement inoculated the Cartel against potential cheating by its members.”
The lawsuit comes after the US Dept. of Agriculture released its Farmer Fair Practices Rules which were developed to protect the rights of farmers. But detractors said the rules would raise prices for meat and poultry and cost jobs.
In a Feb. 2 regulatory filing with the Securities and Exchange Commission (SEC), Laurel, Mississippi-based Sanderson Farms said the company plans a vigorous defense.
In a statement, Tyson Foods spokesman Gary Mickelson said the claims are false. “We want our contract farmers to succeed and don't consult competitors about how our farmers are paid,” he said.
“Our average contract farmer has been raising chickens for us for 15 years,” Mickelson noted. “The compensation we provide is set out clearly in contracts the farmers voluntarily enter into. Our contracts with farmers are typically three to seven years or longer. The farmers are free to discuss the terms of their contracts with whomever they want, including other farmers, and are also free to switch to other chicken processors who operate in their area.”
Mickelson added that research on contract poultry growers shows that farmers have been paid more for their work over time. Citing a 2015 study by Dr. Thomas Elam, president of agricultural consulting firm Farm Econ LLC, Mickelson said the average farmer payments per pound of chicken have increased almost 53 percent since 1990.
According to the company’s website, the company uses a “performance-based incentive system” that rewards poultry farmers who effectively convert the feed the company provides into weight gain in the birds. Additionally, the payment formula accounts for various factors such as the number of birds, the amount of feed used, the performance of a flock compared to those raised by other contract growers and the weight of the birds delivered to Tyson’s processing plants.
The case is Haff Poultry Inc. et al v Tyson Foods Inc. et al, U.S. District Court, Eastern District of Oklahoma, No. 17-CV-00033.