Georgia Dock officials requiring Tyson Foods, poultry industry to submit price affidavits

Officials with Georgia’s Department of Agriculture, which oversees Georgia Dock poultry prices, are requiring Tyson Foods and the rest of the poultry industry to submit weekly price affidavits that will be used to calculate the industry benchmark price for the commodity.

The new requirements are a result of ongoing class action litigation against the poultry industry for alleged price fixing dating back to 2008. The first affidavits were due Tuesday (Nov. 29), according to Julie McPeake, spokeswoman for the Georgia Dock Indices. She said companies that fail to comply will no longer be able to participate in the index.

Springdale-based Tyson Foods, the largest of all poultry companies in the U.S., has long been an active member of the Georgia Dock. But Tyson executives last week said that just about 4% of its chicken is priced off that index. Tyson officials are considering the request from the state of Georgia and will continue to contribute information for the Georgia Dock. The company said when asked, it sends accurate information based on actual and recent transactions.

“We do not see the prices reported by our competitors to the state. We negotiate many different sales contracts with customers, however, only a small portion of our chicken products – 3% to 4% – are sold under contracts with ties to the Georgia Dock,” said Tyson spokesman Worth Sparkman.

Tyson Foods President Tom Hayes recently told analysts during the company’s Nov. 21 earnings call that the Georgia Dock index is just one of many pricing metrics it uses with its diverse customer base. If the Georgia Dock index were to fold up, Hayes said, “We don’t feel like it has a significant impact to us, the Georgia Dock has had very little influence on our pricing strategy … it would have no impact if it went away.”

Hayes explained, “Customers can negotiate to price it off of whatever index they would like. What we have found is that’s not a good proxy for costs, and we have some very sophisticated buyers that tend to look more at grain inputs than they do the Georgia Dock.”

He said more of Tyson’s customers are moving toward list pricing which includes promotional elements. He said aside from locking in against grain costs, the promotional pricing model is being used in Tyson Foods’ prepared foods segment for retail and food service.

Other poultry companies like Sanderson Farms said it will sign the affidavits and remain part of the index that has been the industry benchmark for 40 years.

The heightened scrutiny over the benchmark index came to light as the Georgia Dock price index was deemed “highly susceptible to collusion,” according to one of the complaints filed in Chicago federal court. Internal documents within the Georgia Department of Agriculture also cited inadequate resources and a lack of cooperation from chicken companies.

There has also been threats from the state regulators to shutter the index if prices can’t be substantiated with accurate information from its participating members.

In response to the ongoing civil litigation against Tyson Foods, which includes a new suit filed in Fayetteville Federal Court this week, Tyson Foods’ CEO Donnie Smith denies all allegations and said the company will defend itself in court.

The local class action litigation filed against Tyson was from Harold Voellinger who sued individually and on behalf of Tyson shareholders who purchased Tyson Foods shares between Nov. 23, 2015 and Nov. 18, 2016. The case was filed Monday (Nov. 28) in the Western District of Arkansas. Smith and CFO Dennis Leatherby are individually named as defendants in the case.

The plaintiffs in the local suit claim Tyson, Smith and Leatherby violated the terms of the Securities and Exchange Act. Count 1 involves the alleged dissemination of false and misleading statements which they knew were misleading in that they contained misrepresentations and failed to disclose material facts to shareholders, Voellinger asked for a jury trial that will determine appropriate damages to shareholders of the class period.