Market Overview

Players In Chicken Industry Face A Tough End To 2016

Players In Chicken Industry Face A Tough End To 2016

Tyson Foods, Inc. (NYSE: TSN) shares are plummeting 13.8 percent on Monday following disappointing Q4 earnings guidance from the company and the surprise departure of CEO Donnie Smith. The downward revision to guidance is particularly surprising considering that Tyson had previously raised its 2016 guidance twice this year.

The guidance miss and management change come on the heels of a report last week by the Washington Post that chicken companies may have been overcharging customers for years. The report referenced an internal document from the Georgia Department of Agriculture (DOA) questioning whether or not chicken companies have been colluding to inflate chicken prices.

History Of Colluding

This is not the first time Tyson and chicken rivals Sanderson Farms, Inc. (NASDAQ: SAFM) and Pilgrim’s Pride Corporation (NASDAQ: PPC) have been accused of colluding. These three companies and nine others were named in a class action lawsuit related to price fixing back in September.

The Post report focused on an internal document in which Georgia DOA director Arty Schronce called into question his periodic calculation of the “Georgia Dock” chicken price estimate. Schronce reportedly feels there is not enough transparency in the process and information from the chicken companies has been unreliable.

Price fixing is a violation of the Sherman Act and evidence against the chicken industry could be taken very seriously by the Department of Justice. Shares of Tyson, Sanderson Farms and Pilgrim's Pride are all down more than 8 percent in the past month.


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