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Sanderson, other poultry processors wing it after index is discontinued


Sanderson Farms Inc. and other poultry processors find themselves without a long-standing index used in establishing a price they charge retailers.

The Georgia Dock Index, which was established in 1972, was discontinued in December.

The index’s accuracy had been called into question, so the Georgia Department of Agriculture requested that producers provide supporting documentation on pricing.

Yet, not enough producers provided documentation and affidavits to justify their prices and the revised rule was dropped.

So the Georgia Department of Agriculture set up a new one.

But the new Georgia Premium Poultry Price Index likewise did not get support from producers, according to Julie McPeake, chief communication officer of the department, and was dropped on Feb. 1, a month after it was established.

» READ MORE: Sanderson rides dark-meat sales to net profit rebound

An internal document shows that the department’s director of the bulletin that makes a weekly calculation for the going rate for a pound of chicken on the Georgia Dock was suspicious of the accuracy of the data provided by producers, The Washington Post reported on Nov. 17.

The U.S. Department of Agriculture stopped using the index in the preceding months.

The Post also reported that the Georgia Dock price has risen significantly above other chicken price averages in recent years.

Joe Sanderson Jr., chairman and chief executive officer, said in a company release on Dec. 21 that the company believes the Georgia department is “going about determining a new system in the right way.”

However, the Mississippi-based company, which has a processing plant in Moultrie, Ga., and a feed mill and a hatchery in Adel, decided not to participate in the new index.

The company, the third-largest poultry processor in the nation, has 12 processing plants located around the South, including seven in Mississippi, with the latest commencing operations in January in St. Pauls, N.C.

Lampkin Butts, chief operating officer, said during a conference call with analysts on Feb. 23 that the new index would not have been “an appropriate starting place to negotiate with our retail grocery store customers.”

“We believe that the previous quote accurately reflected supply and demand dynamics of the market,” Butts said.

Meantime, the Florida Attorney General’s office is investigating the pricing of chicken through the Georgia Dock Index “and other information on poultry and poultry products published by the Georgia Department of Agriculture,” Sanderson Farms said in a filing with the federal Securities and Exchange Commission.

Sanderson Farms “intends to cooperate fully” with the antitrust civil investigation, it said in a Feb. 21 filing with the SEC.

Butts said in the conference call that only 10 percent of its product was priced “using a formula that referenced the Georgia Dock.”

“The suspension of the Georgia Dock quote had no material impact on our company, and we don’t anticipate the permanent suspension of the service will either,” Butts said.

The company has been targeted by antitrust lawsuits filed in two federal district courts.

Former contract chicken growers filed suit Jan. 27 in the U.S. District Court for the Eastern District of Oklahoma against Sanderson and other major processors, seeking damages for what they contend is price fixing that squeezed them out of their livelihood.

Sanderson and 13 other processors were sued along the same lines last fall in the U.S. District Court for the Northern District of Illinois.

Both cases are pending.

Consolidation in the poultry industry has become a point of debate. With a handful of processors controlling 40 percent of the market, accusations have been leveled at the leaders, including Sanderson Farms.

However, most of the growth in recent years has been in the mid-sized processors, according the WattAgNet.com, a clearinghouse on meat markets.

The National Chicken Council notes that about 25,000 family farmers have contracts with the processors and produce about 95 percent of broilers.


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