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Pilgrim's Pride Falls After Chicken Companies Are Charged With Price Fixing

The U.S. Justice Department indicted Pilgrim's Pride Corporation (NASDAQ: PPC) CEO Jayson Penn, former Vice President Roger Austin, along with Claxton Poultry Farms President Mikell Fries and Vice President Scott Brady for allegedly conspiring to fix prices on chickens, The Wall Street Journal reported on Wednesday afternoon.

What Happened

The one-count indictment alleges the current and former executives of leading chicken producers allegedly conspired to fix prices on chickens sold to restaurants and grocery stores.

Accusations and allegations of price-fixing date back to 2016 when restaurants and other major buyers accused major poultry producers of inflating their prices, according to WSJ. Since then, similar lawsuits targeted sellers of foods, grocery and retailers, and restaurant suppliers.

See Also: Impossible Foods Scores Big Win In Legal Battle With Nestle

Why It's Important

The chicken industry has seen a lot of consolidation over the decades to the point where five companies today control 61% of the entire U.S. chicken production market. The largest player is Tyson Foods, Inc. (NYSE: TSN) at 21%, followed by Pilgrim at 17%.

WSJ reported chicken prices rose 11% from mid-2012 through the end of 2018 when the Department of Agriculture starting calculating national prices for whole chickens.

But since then, chicken prices fell 27% from 2019 through February 2020 as chicken companies increased capacity ahead of expectations for larger exports as part of signed trade deals, according to WSJ.

What's Next

Chicken producers deny wrongdoing in these private litigations and are fighting the lawsuits. The companies note that supply and demand factors and shifts in domestic consumption drive chicken prices higher or lower over the years.

Pilgrim's Pride stock was down 10% to $18.81 at time of publication. Peer Tyson Foods (NYSE: TSN) was down about 4% at $59.95.

See more from Benzinga

© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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