Meat + Poultry - May 2006 - 50

Business Notes

Continued from Page 14

Processors fined $9.25 million in price fixing case
Three of the industry's largest processing companies were found guilty of
ignoring erroneous U.S. Dept. of Agriculture boxed-beef price
reports and fined a total
of $9.25 million in a class
action lawsuit by a federal
jury in Aberdeen, S.D., this
past month.
The jury in the pricefixing case unanimously
ruled against three of four
accused meat companies,
which included: Tyson
Fresh Meats Inc.; Cargill
Meat Solutions Corp.;
and Swift Beef Co. Jurors
recommended a $4 million fine against
Tyson, a $3 million fine against Cargill,
and a $2.25 million fine against Swift.
National Beef Packing Co., the fourth
company named in the case, was found
not liable.

The lawsuit, which sought $43 million, alleged the defendants violated the
Packers and Stockyards Act, which prohibits unfair and
deceptive practices by packers and
stockyards. The
lawsuit was filed
in 2002 by three
cattle producers,
including
Herman Schumacher
with the RanchersCattlemen Action
Legal Fund United
Stockgrowers of
America, Michael
Callicrate, and Roger Koch, all of whom
sold cattle to the companies in the spring
of 2001, the time period when prices for
choice and select cuts of meat were misreported by the U.S.D.A. The plaintiffs
alleged the meat companies knowingly

used the errant pricing information to
underpay cattle producers for livestock.
Representatives of the defendants in
the case expressed disappointment in
the decision and are appealing the case.
"The evidence at trial showed that
C.M.S.C. honored its contracts with the
members of the plaintiff class in all respects," said Mark Klein, Cargill's spokesman. "The U.S.D.A. made the mistake
that resulted in the reporting errors that
were the subject of the lawsuit."
Meanwhile, R-CALF USA President
Chuck Kiker claimed the verdict was a
victory for all producers.
"R-CALF has always been about
competition and fairness in markets,"
Kiker said. "Today's verdict brings us
one step closer to strengthening our
cattle industry by helping us accomplish
what our organization set out to do, and
that's to get fair, competitive markets for
cattle producers."

Pilgrim's Pride responds to second quarter loss
Citing a "challenging operating environment for U.S. poultry
companies," Pilgrim's Pride Corp., Pittsburg, Texas, reported
a net loss of $32 million, or 48c per share, on total sales of
$1.27 billion for the second quarter ended April 1, 2006. In
fiscal 2005, the company reported net earnings of $56.4 million, or $0.85 per share, on total sales of $1.38 billion.
For the six months ended April 1, 2006, the company
reported a net loss of $6.3 million, or 9c per share, on total sales of $2.61 billion. For the first six months of fiscal
2005, Pilgrim's Pride reported net earnings of $104.9 million, or $1.58 per share, on sales of $2.74 billion.
O.B. Goolsby Jr., president and C.E.O., attributed this
year's loss to the snowball affect of avian influenza spreading overseas, slumping export demand and a surplus of
protein domestically.
"Our second-quarter results reflect a challenging operating environment for U.S. poultry companies," said
Goolsby. "The spread of H5N1 avian influenza in parts
of Europe and Asia has significantly reduced export demand, leading to higher inventory levels and contributing
to lower overall market pricing. At the same time, industry
production levels have continued to increase, creating an
oversupply situation and further weakening prices."
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MEAT&POULTRY

May 2006

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In the company's U.S. operations, market pricing during
the second quarter for breast meat and leg quarters declined
approximately 30 percent from year-ago levels, he said.
In response to the current operating environment, Pilgrim's Pride announced a plan to improve its position. The
plan includes:
* reducing weekly slaughter rates by approximately 3 percent (or about 830,000 head per week);
* cutting capital spending by as much as $40 million for
fiscal 2006; and
* focusing on cost reductions and improved efficiencies.
"We believe that by taking these actions at a time of the
year when chicken consumption normally increases, we
will better balance our production with demand for the
remainder of the year and strengthen our competitive position. Reducing overall supply to better match demand is
an important component in helping return the industry to
profitability," Goolsby said. "While the short-term operating environment remains challenging, we are confident that
continued long-term growth in demand for high-quality,
convenient and low-fat meat proteins will position our company for a return to profitable growth when conditions in
the chicken markets begin to improve."

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Meat + Poultry - May 2006

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