- usinggraphical analysis, how the strategy described in the newspaper article may or may not harm competition and consumers. You should also explain how price-fixing works and its penalties.
Peanut farmers advance in price-xing lawsuit against Big Shell BySamBloch 12-14-2020 A $57 million class action suit alleges that three shelling companieswho together dominate 80 percent of the peanut industrygconspired to depress prices. In recent years, the biggest companies in tuna, chicken, and beef have all been accused of colluding with their competitors, orchestrating alleged schemes to enrich themselves at the expense of producers and consumers. Now, meet the latest entrant in the price-xing annals: Big Peanut. Earlier this month, a Virginia federal judge certied a class action lawsuit against America's three largest peanut shellers, ruling that ve farmers and their businesses made a \"plausible" argument that the companies that control their market conspired to depress crop prices by 18 percent. Almost 12,000 peanut farmers across a handful of Southeastern statesmmrily Georgia, but also Florida, Alabama, and otherswho sold to those companies between 2014 and 2019 will have the opportunity to seek their share of no less than $57 million in lost earnings. Two of the defendants, 01am Peanut shelling and the Birdsong Corporation, have reached preliminary settlements. A third, the Golden Peanut Company, a subsidiary of processing giant ADM, is still ghting the charges. The lawsuit centers around a particular kind of nut called the runner, which represents about 80 percent of the three million tons of peanuts that American farmers harvest every year. The conspiracy \"has been devastating to many farmers," the plaintiffs said, in a court ling. They claim the low prices led \"numerous farmers to borrow from generations of equity built up in their land\" to stay aoat, and that smaller farmers have been \"run out of business." Despite having settled, Olam \"continues to deny the allegations," a spokesperson told The Counter. (Birdsong and Golden Peanut did not respond to media inquires.) The lawsuit centers around a particular kind of nut called the runner, which represents about 80 percent of the three million tons of peanuts that American farmers harvest every year. Runner peanuts are excellent for roasting, but the overwhelming majority aren't eaten that way. Typically, they're sold raw to shelling companies, who process them to be ground into peanut butter and other snacks. (The peanuts eaten at ballparks are called Virginias, and they're only about 14 percent of the nation's peanut crop.) In 1970, there were 92 peanut shelling companies in the US. There are just 14 today. Runners are typically planted in April or May, after the last frost of the year. When they're ready for harvest in the fall, farmers pull the bunchy plants out of the ground, and quickly tnick them over the local buying points. These middlemen businesses clean and grade the crops, and have exclusive contracts to sell them to shellersgcompanies like Birdsong, Golden, and 01am Peanut Shelling. Once inside the shelling plant, the nuts roll through a series of destoners, shakers, aspirators, separators and elevators that remove the kernels, and dump them into sacks for shipment or storage. From there, the shellers market and sell the bulk nuts to candy companies and manufacturers, such as Hershey, Mars, and .lit'. As both buyer and seller, shellers have long had a lot of power in the market. That power has only grown over the last few decades. Since 1970, the number of shellers has consolidated from 92 companies nationally down to just 14 today, the farmers say, with the three shellers named in the lawsuit controlling between 80 and 90 percent of all peanut processing in the US. The suit alleges that shellers wield this market power coercively, using it to roast growers with unfair deals. That's a hugely powerful bloc, even by the standards of the highly consolidated farm sector. For instance, America's four largest beef companies control over 73 percent of their market, and the four biggest chicken processors control 54 percent of theirs, according to a recent report by rural sociologist Mary Hendrickson. With fewer companies to sell to, the farmers say they struggle to nd better deals. Even grower-owned processing co-ops, like Georgia's Premium Peanut, \"are not a signith competitive challenge to shellers as large and as dominant" as the defendants, according to the complaint. There's something else, too, that distinguishes the peanut 'om your typical commodity crop. Unlike corn or soybeans, there's no futures market or public exchange to buy and sell all those millions of tons of nuts. That means prices are set entirely through contracts between shellers and farmers, who say they're at the mercy of the \"dominant players." The suit alleges that shellers wield this market power coercively, using it to roast growers with unfair deals. Despite signicant shocks to the system, the farmers say the prices they have received for their raw, unharvested crops has remained pretty much the same since 2014, at around $425 per ton. They say prots would have increased under fair market conditions. Prices haven't much budged during the pandemic, even as consumption of pemummd especially peanut butteriis at an all-time high. In 2016, for instance, aer heavy rains and oods from Hurricane Matthew pmnmeled the Carolinas, and droughts starved elds in Georgia and Alabama, the national runner inventory fell by almost 100,000 tons. Prices didn't reect that scarcity. Same thing, after Hurricane Michael crushed peanut crops in Florida, Georgia and Alabama in 2018. And those prices haven't much budged during the pandemic, according to USDA market reports, even as constnnption of peanuts, and especially peanut butter, is at an all-time high. That all caught the attention of the farmers in the suit, whose attorneys have since discovered records that the judge said lend credence to their accusations. Emails showed that employees at the three companies exchanged purchase prices and forged chummy relationships through trade associations. The exchange of private pricing information through illegal coordination, data tools, and other means has been a hallka of the price- xing suits in other areas of the food sector. "It is always a pleasure to break bread together and talk about the industry and where we are and where we are going,\" read one email between 01am and Birdsong employees. The defendants claimed in court that those exchanges don't violate the Sherman Act, which bans price fixing. The farmers say that more salty talk will be forthcoming through roughly two dozen scheduled depositions. A jury trial for the case, entitled In re Peanut Farmers Antitrust Litigation, is set for January. ADM agrees to pay $45M to settle price-xing allegations in peanuts, WSJ reports Published March 12, 2021 Christopher Doering Dive Brief: I Archer Daniels Midland agreed to pay $45 million to settle price-xing allegations in its peanutprocessing division, The Wall Street Journal reported The settlement comes as a civil lawsuit by almost 12,000 U.S. peanut farmers accused the agrimrltural processor of suppressing prices it paid them. I Agriculture producers contend ADMs Golden Peanut division coordinated with Birdsong Peanuts and 01am to report faulty supply and pricing data that kept prices low for the past six years. The business publication said Birdsong and 01am struck separate settlement deals in the civil litigation in late 2020. They paid a combined $58 million and neither company admitted wrongdoing. u The settlement marks the latest antitrust revelations to impact the food industry. Last week, Tyson Foods, .1135 USA, Smitheld Foods, Hormel Foods and other pork processors were accused by food distributor Syseo in a "classic price xing scheme" when they shared sensitive data about their production levels in an effort to increase prices. Dive Insight: The United States last year produced around 6.13 billion pounds of peanuts last year, down from 7.12 billion pounds three years earlier, according to data from Statista. However, how much armers receive for their crops has remained stubbornly low even as peanut consumption is at an all-time high. USDA reponed in November that farmers got an average of 21 cents a pound, a level it has uctuated around for several years. The price comes as the National Peanut Board noted each person consumed 7.6 pounds of peanuts in 2020 as homebotmd consumers turned to its healthy halo and versatility as an option throughout the day. More than half of the peanuts people eat comes in peanut butter, the trade group said. ADM and the other companies have argred market forces, rather than collusion, have driven down prices, The Wall Street Journal noted. Still, the settlements reached with 01am, Birdsong and now ADM may go a long way in explaining, at least in part, why peanut prices have remained so low. In a statement provided to Food Dive, ADM said while it denied any wrongdoing, it agreed to settle the lawsuit rather than expend additional time, money, and resources on the case. "ADM has been building strong relationships with farmers since the company's inception in 1902, and we continue to make farmers the center of our business," the company said. It's possible that aer 01am and Birdsong reached separate deals last year, ADM felt it had little choice but to agree to its own deal. The settlement continues a string of agreements reached in the food processing industry. Wson and Pilgrim's Pride have separately reached deals with poultry buyers to settle price-xing claims. And last December, court documents revealed JBS will pay $245 million to compensate direct purchasers for damages in a price- xing class action suit involving pork. The Justice Department also reponedly is looking into the buying habits of beef processors in cattle. Inrecent years, the D0], the USDA and attorneys representing groups of consmners or business customers also have brought cases against dairy and tuna. It's uncertain whether the recent settlements and investigations will change the business practices at these food processing giants. In many cases, their respective markets are controlled by just a few processors, a factor critics argre gives them an opportunity to manipulate prices in whatever way benets them. In peanuts, Birdsong and ADM's Golden Peanut unit handle 80% to 90% ofthe country's crop, The Wall Street Journal noted, citing the armers' lawsuit
