Madeline Perry is a reporter with the Midwest Center for Investigative Reporting. Reach her at firstname.lastname@example.org Sky Chadde is the Midwest Center’s Gannett Agricultural Data Fellow. He can be reached at email@example.com. This story is embargoed for republication until July 20.
On November 13, 2012, Scott Brady, Claxton Poultry’s vice president, texted his boss, Mikell Fries, about a conversation he had with Roger Austin, Pilgrim’s Pride vice president.
“I talked to Roger,” Brady wrote. “He said to raise our prices, on wings.”
“Tell him we are trying!” Fries replied.
“Will do,” Brady said.
The texts were part of a price-fixing indictment that involves the country’s major poultry processors. Last month, federal prosecutors said a grand jury found that executives from Pilgrim’s Pride, which is owned by Brazilian giant JBS, and Claxton Poultry Farms conspired to raise prices for consumers and rig bids for broiler chickens from at least 2012 through 2017.
“We take this matter very seriously,” Pilgrim’s Pride said in a statement. “The company is committed to high ethical standards, governance, and free and open competition that benefits both customers and consumers. Pilgrim’s will continue to fully cooperate with the Department of Justice in their investigation.”
In 2019, Pilgrim’s Pride made about $455 million dollars, about an 84 percent increase from the previous year, according to a company press release. Claxton Poultry is a privately owned company and doesn’t need to report financial information publicly.
While poultry processors have seen large profits, poultry growers — the farmers that care for the chickens while they’re maturing — have not shared in the wealth, current and former growers said.
Poultry farmers are responsible for much of the cost burden when growing broiler chickens. Production companies provide growers with chicks and feed, but everything else is the grower’s responsibility. This includes building the chicken houses and paying for everything associated with owning, maintaining and operating the farm.
“In poultry the choice is stark: Sign the handcuffing contract offered, or get out of the business through bankruptcy,” Robert Taylor, a researcher who specializes in agricultural and rural economics, wrote in a 2010 paper on poultry growers. “Once one enters the life of a grower, the trap is closed: high capital costs and large debt to enter the business, no input on product price, no market in which to sell goods and no way out except bankruptcy if the (company) ‘dumps’ the grower.”
Mike Weaver, who helped found the advocacy group Contract Poultry Growers Association of the Virginias, spent 18 years growing poultry for Pilgrim’s Pride.
“If they give you bad chicks or bad feed, there’s nothing you can do about it,” he said. “Either bad input makes it impossible to make a good chicken.”
Cameron Bruett, a Pilgrim’s spokesperson, said the company provides a lot of support to its growers, including technicians and veterinarians to ensure growers get what they need.
“There is no benefit in providing poor or bad feed,” he said. “In the event an issue caused a specific grower to experience high mortality rates, we would issue credits so their pay was not impacted. We strive every day to produce the healthiest chicks possible.”
Reid Phifer, a poultry farmer in North Carolina, has grown chickens for Wampler Foods and Pilgrim’s Pride since 1999. This year, he said, he’s made far less money than he was making 15 years ago, while expenses have increased substantially.
One reason growing is so difficult, he said, is there is no recourse with the poultry companies if the growers receive bad chickens or inferior feed, he said.
“The operation of a chicken grow-out farm is very expensive,” he said. “A grower can easily spend several thousand dollars the first month of production on gas alone while keeping the newly hatched chicks warm, especially when understanding their normal body temperature is 104 degrees.
“Good chickens grow themselves,” he continued. “Bad ones drive you mad.”
Jayson Penn, Pilgrim’s CEO and one of the executives involved in the price-fixing investigation, is out on bail and went on a paid leave of absence to focus on his legal defense on June 14, according to a company press release. As CEO and president, Penn’s salary is over $4 million.
The charges carry a maximum penalty of 10 years in prison and a $1 million fine, but that fine could be higher if the investigation finds the victims lost more than $1 million to the defendants or if the defendants gained more than $1 million through price-fixing.
The executives are the first to be charged in an ongoing criminal investigation into price-fixing and bid-rigging involving broiler chickens. The Department of Justice said that the investigation was ongoing.
“Particularly in times of global crisis, the division remains committed to prosecuting crimes intended to raise the prices Americans pay for food,” Assistant U.S. Attorney General Makan Delrahim said in a statement. “Executives who cheat American consumers, restauranteurs, and grocers, and compromise the integrity of our food supply, will be held responsible for their actions.”
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