ST. LOUIS (AP) -- Poultry producer Pilgrim's Pride said Monday that it plans to appeal a federal judge's ruling that it must pay nearly $26 million to a group of chicken farmers for trying to manipulate chicken prices in 2008.
Federal judge Charles Everingham ruled Friday that internal emails show Pilgrim's closed plants and cancelled its contracts with farmers with the express intention of cutting the supply of chicken and pushing retail prices higher, violating the 1921 Packers and Stockyards act.
As a result, Everingham said the Pittsburg, Texas, company must compensate dozens of independent farmers in Arkansas who raised chickens for the company under contract and were hurt financially by the scheme.
Contract chicken farmers assume the cost of building industrial barns where they raise birds. When the farmers had their contracts canceled as part of Pilgrims' plan to tighten poultry supplies, Everingham wrote, that left them with no income to pay off their farm loans.
"We're disappointed in the court's findings, and we don't find them consistent with the Packers and Stockyards Act," Pilgrim's CEO Bill Lovette said in a statement sent to The Associated Press. "We completely reject the idea that we tried to manipulate the market. We tried to live in the market, not manipulate it."
At issue is Pilgrim's decision to close a poultry plant in El Dorado, Ark., in 2008. The company was facing the worst crisis the poultry industry had seen in decades, demand was plunging because of the economic crisis and feed costs were at historic highs.
Pilgrim's hired an outside consulting firm and decided to close its plants to limit the poultry supply, hoping to eventually boost the retail price of chicken. The company examined other industries where a 6 percent cut in supplies led to a 40 percent increase in prices, according to Everingham's ruling.
Everingham cited an internal email, sent by Pilgrim's Pride's chief restructuring officer, William Snyder, that argued against a plan to let an outside company buy the El Dorado plant to get production going again.
"... I would not recommend it because it would enable them to flood the market with cheap chicken and foil our plans to restrict the chicken in the area and allow prices to rise," the email said, according to Friday's court ruling.
Despite its efforts, Pilgrim's Pride filed for bankruptcy court protection in late 2008, and Brazilian meatpacker JBS SA bought a majority stake in the company, which continued operating through the bankruptcy process.
Shares of Pilgrim's Pride fell 35 cents, or 8.2 percent, to close at $3.92 amid steep market declines Monday.