ATLANTA — The Georgia Department of Agriculture (G.D.A.) indefinitely suspended the Georgia Dock, a leading wholesale chicken price index, and announced plans to launch a new index in January 2017.
In November, the G.D.A. implemented new price reporting requirements that included the submission of an affidavit vouching for the accuracy of data that poultry companies submitted. But, in a statement, Julie McPeake, chief communication officer at the G.D.A., cited “the lack of submissions” for the new requirements as the reason for the suspension.
“To assure that the industry maintains a reliable pricing tool, the Georgia Department of Agriculture anticipates the introduction of the Georgia Premium Poultry Price Index (GPPPI) the week of January 4, 2017,” Ms. McPeake said. “This will include a posting of a summary of the index on the website, followed by a webinar for all interested parties. Official reporting for this index is expected to begin February 1, 2017.”
The Georgia Dock is compiled from a survey of poultry processors operating in the state. Producers, processors, distributors, fast-food operators, chain store buyers and other stakeholders in the food industry use the index. But reports in national news outlets such as The Wall Street Journal and The Washington Post cast doubt on the validity of the index, which at times put poultry prices much higher than other indexes such as Urner Barry.
Perceptions about the Georgia Dock weren’t helped when the U.S. Department of Agriculture stopped including the index in its market news reports in August, and when Arty Schronce, public affairs director for the G.D.A., expressed his concerns about the Georgia Dock in a department memo in which he called the index “a flawed product that is a liability to the Georgia Department of Agriculture.”
Joe F. Sanderson Jr., chairman and chief executive officer of Laurel, Mississippi-based Sanderson Farms Inc., expressed support for the department’s process.
“We believe they are going about determining the new system in the right way; being deliberate and getting input from every constituency group who is affected by the benchmark, including buyers, sellers, distributors, regulators and other interested parties,” Mr. Sanderson said in a written response to the G.D.A.’s announcement.
Mr. Sanderson explained his company’s use of the index during an earnings call with financial analysts. For the past 40 years and until recently, the company said in a statement, Sanderson Farms has priced a portion of the company’s tray pack production based on formulas that used the Georgia Dock whole bird price as its base. In fiscal 2016, 10.15% of the company’s overall product mix was priced using these formulas.
The G.D.A.’s decision prompted Sanderson Farms to contact all of its affected customers and reach an agreement on a temporary pricing formula until the G.D.A.’s new index is available. The company said the interim pricing formula is similar to what the company already has established and will be negotiated based on a product mix, location, volume and customer needs.
“Retail grocery tray pack products are important to our overall business, and we value our customer relationships in this market segment,” Mr. Sanderson said. “With the suspension of the Georgia Dock, we are committed to working with these customers to find a new benchmark to use in beginning negotiations with our customers.“It is important to note that regardless of the benchmark used, our negotiations with customers ultimately determine the price, and we believe our prices fairly and accurately reflect supply and demand dynamics. We have had positive conversations with our customers and do not expect this recent action to affect our business.”