Dive Brief:
- Experts are questioning the Georgia Dock Index benchmark for chicken pricing, which calculates a much higher price for chicken than other similar benchmarks. This means chicken producers can bring in much higher profits because retailers pay more for their supply.
- The issue, critics say, is that the Georgia Dock benchmark is determined by companies themselves which self-report without independent third-party verification. Those companies include Tyson Foods, Sanderson Farms, Pilgrim’s Pride, and Wayne Farms, with a few producers having several plants reporting pricing for the index.
- The Georgia Dock value for whole birds is $1.13 per pound, as compared to $0.70 to $0.85 per pound from two other benchmarks used by commercial buyers, including restaurants.
Dive Insight:
In the fourth quarter, the difference, or spread, between the Georgia Dock and other indexes averaged nearly $0.40 per pound. A spread of that magnitude can mean a chicken producer turning a profit or reporting a loss, particularly if the producer has a wide retail customer base. It also means the difference of billions of dollars consumers pay at retail.
Chicken priced off the Georgia Dock Index makes up about 10% to 15% of the U.S. chicken supply. With a large supply of poultry to go around, the pricing discrepancy between Georgia Dock and other indexes has surprised buyers.
In addition to pricing, lower cost of feed can also be a boon to chicken producers' profits. In its latest earnings report, Tyson reported a jump in operating income to $344 million over $206 million the year before thanks to declining prices of chicken feed. The feed is made primarily with corn and soybeans, and both crops saw price declines last year amid bumper crops.