Talking Turkey: An Anti-Monopoly Thanksgiving
Photo courtesy of iStock.
Turkey is generally the biggest expense on the Thanksgiving table. While last year’s turkeys reached their lowest price since 2010, according to American Farm Bureau Federation estimates, bird costs are up this year by 24%. There are many factors driving up prices, including higher transport costs, supply chain disruptions, and high turkey feed prices driven by drought. Because of rising production costs, turkey producers do not expect to see much benefit from this year’s higher prices.
While this may be consumers’ first turkey price spike in a decade, a class action lawsuit brought by wholesale turkey buyers argues that there has been trouble in turkey production long before the pandemic. Food wholesalers have alleged that nine turkey processors representing approximately 80% of the market conspired to cut production and raise wholesale prices since at least 2010. Their claims mirror similar price-fixing scandals in the chicken and pork industry and hinge on a data-sharing service, AgriStats, that meat corporations allegedly used to monitor each other’s production and catch potential deviants from the conspiracy. Industry consolidation can make price-fixing easier. The three largest turkey corporations, Cargill, Hormel, and Butterball, control roughly half of the turkey market.
The case argued that before 2009, turkey production generally tracked with changes in wholesale turkey prices and feed costs, but starting around 2010 turkey production fell and prices “spiked to an unprecedented level,” the complaint said. From 2000 to 2009, the average wholesale price for a turkey hen ranged between $0.55 and $0.85 per pound, according to USDA data. Starting around 2010, the price steadily rose every year reaching $1.15 per pound in 2016, a 35% increase from 2009. Turkey production was also below the 2000-2008 average each year between 2009 and 2018. This discrepancy between elevated wholesale prices and decreased turkey production continued until 2016 — coincidentally when the first AgriStats price-fixing case was filed against chicken processors. “Defendants clearly changed their behavior after the commencement of the Broilers litigation,” the plaintiffs allege.
Thanksgiving turkey prices didn’t track with these wholesale price increases, in part, because retailers willingly lose money on Thanksgiving turkeys to bring in customers to do the rest of their holiday shopping (Amazon’s $1 a pound turkey deal, anyone?).
A judge permitted this turkey price-fixing case to go forward in October 2020, and at least one turkey processor, Tyson Foods, has since paid $4.6 million to settle the allegations. It remains to be seen if more processors follow their lead. Given these allegations, and similar charges made against chicken processors, Sen. Elizabeth Warren requested that the Justice Department “open a broad investigation into the impact of price-fixing, wage fixing, and consolidation in the poultry industry” in a letter sent Tuesday.
Additional Thanksgiving-Related Reading
In addition to price-fixing charges, turkey processors face a legal challenge for allegedly misleading consumers. Earlier this year a group of farmer, worker, and environmental advocates alleged that Cargill misled consumers by claiming that their turkeys were raised by “independent family farmers.” Cargill sources their turkeys from contract growers who have little meaningful independence, the suit alleges. This case follows a recent rise in lawsuits charging food companies with inaccurate or misleading labeling. (The New York Times)
A report by Food & Water Watch published last week assessed market concentration in 55 grocery categories and found that “tight oligopolies/monopolies” controlled more than 60% of these product segments. Some standout findings: The top four companies in each industry sold 74% of all yogurt, 80% of all baby food, and 92% of all soda. A handful of firms such as Kraft-Heinz and General Mills commanded leading positions in multiple categories. (Food & Water Watch)
A review of corporate earnings calls by More Perfect Union suggests that large food corporations, among others, may be taking advantage of inflation expectations to raise prices and boost profits. Nearly 100 of the largest publicly traded U.S. corporations reported profits for 2021 that were 50% above profit margins from 2019.
(The New Republic)