In February several grocery retailers and the country's two biggest food distributors filed suit against a slew of poultry companies like Tyson Foods and Perdue Farms, accusing them of colluding to fix the price of broiler chickens for 10 years. It's the third lawsuit in less than two years alleging poultry price fixing, and a fascinating new story from NPR explains how the story leaked in the first place.
In 2016, some Wall Street hedge fund investors had bet a lot of money that the stocks of chicken companies (along with the price of chicken) would fall, but the stock prices and chicken prices remained high, Dan Charles reports for NPR. The investors wondered if chicken companies were keeping prices artificially high, and hired a lawyer to investigate.
The lawyer found that many big chicken buyers, such as supermarkets and restaurant chains, were using the Georgia Department of Agriculture's chicken price index to set their prices, since Georgia is the nation's leading poultry producer. A department employee named Arty Schronce was in charge of compiling the index. He called big companies like Tyson weekly and asked how much they were selling chickens and chicken parts for, then sent out the index in a newsletter. But the hedge-fund lawyer noticed that Schronce's numbers were too high -- sometimes 30 percent to 50 percent higher than other indexes, Charles reports.
Then the lawyer found a memo Schronce had written to himself, saying he didn't believe his own index anymore. There was no protocol to make sure chicken was actually selling at the prices the producers quoted. "Within a day of the lawyer getting that memo, it's been passed on to The Washington Post," Charles reports. "When it's published, it destroys the reputation of that price index. Georgia stops publishing it. Which is what Artie Schronce had proposed in his memo; it just took some short-selling Wall Street guys to make it happen."
Chicken prices still didn't fall after chicken buyers stopped using the index, and that's part of the reason for the current lawsuit: chicken buyers say poultry producers had fixed the prices and somehow still are. Not only is this a study in poultry pricing, it may be a cautionary tale about data and their sources.
In 2016, some Wall Street hedge fund investors had bet a lot of money that the stocks of chicken companies (along with the price of chicken) would fall, but the stock prices and chicken prices remained high, Dan Charles reports for NPR. The investors wondered if chicken companies were keeping prices artificially high, and hired a lawyer to investigate.
The lawyer found that many big chicken buyers, such as supermarkets and restaurant chains, were using the Georgia Department of Agriculture's chicken price index to set their prices, since Georgia is the nation's leading poultry producer. A department employee named Arty Schronce was in charge of compiling the index. He called big companies like Tyson weekly and asked how much they were selling chickens and chicken parts for, then sent out the index in a newsletter. But the hedge-fund lawyer noticed that Schronce's numbers were too high -- sometimes 30 percent to 50 percent higher than other indexes, Charles reports.
Then the lawyer found a memo Schronce had written to himself, saying he didn't believe his own index anymore. There was no protocol to make sure chicken was actually selling at the prices the producers quoted. "Within a day of the lawyer getting that memo, it's been passed on to The Washington Post," Charles reports. "When it's published, it destroys the reputation of that price index. Georgia stops publishing it. Which is what Artie Schronce had proposed in his memo; it just took some short-selling Wall Street guys to make it happen."
Chicken prices still didn't fall after chicken buyers stopped using the index, and that's part of the reason for the current lawsuit: chicken buyers say poultry producers had fixed the prices and somehow still are. Not only is this a study in poultry pricing, it may be a cautionary tale about data and their sources.
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