Justice Department probing chicken-farmer payment system

Pilgrim’s Pride Corp. is the country's second-largest U.S. poultry processor by sales volume. On Thursday, the company disclosed in a securities filing that its chicken-grower contracts and payment practices are under civil investigation by the Department of Justice. 

"The probe into poultry farmers’ pay comes as the Biden administration has pushed to curb the power of large agriculture companies, accusing them of using their size to raise costs for consumers while underpaying farmers," reports Patrick Thomas of The Wall Street Journal.

Most chicken farmers are paid through the "tournament system," Thomas explains: "About two dozen farmers in a given region are typically compared against one another to determine their payment rates, using a sliding scale analyzing their chicken production."

The sheer number of variables involved in chicken farming have led chicken producers to complain that it is "too difficult under the tournament system to gauge how much income they’ll be bringing in from flock to flock," Thomas notes. "Chicken companies have pushed back on the criticism, calling the system a performance-based structure that keeps prices down at supermarkets, incentivizes farmers to maximize efficiency and safeguards chickens’ health."

The tournament system has come into question by the Agriculture Department, which proposed new rules in May. In July, the Justice Department required the third-largest U.S. chicken processor, Wayne-Sanderson Farms, to "stop using the system as part of an antitrust settlement that the companies said was needed to complete the merger that formed it," Thomas reports. "Wayne-Sanderson now offers bonuses to farmers who perform well and include a base pay."