The Wall Street Journal reports:

Federal prosecutors have opened separate criminal probes into possible price-fixing by major egg producers and California tomato processors, the latest in a series of U.S. investigations of alleged collusion in food and agriculture.

The investigations, which have not been previously reported, add to concerns that beyond the rising cost of fuel and feed, a hidden factor may be driving food prices higher: collusion among farmers, food processors or exporters.

...The Justice Department wouldn't disclose how it believes processors manipulated the prices of egg products. There's no indication that the department is looking into the larger market for fresh eggs, where prices have increased more than 40% in a year.

But producers of fresh eggs have coordinated their efforts to raise prices, according to industry participants and a Wall Street Journal review of industry documents.

Fresh-egg farmers acted together through a series of export shipments, organized by United Egg Producers, an industry cartel whose 250-plus members include virtually all of the nation's big egg producers. By removing a small fraction of eggs that would have been bound for U.S. sales and arranging instead for their export, United Egg helped tighten domestic supply and drive up the price of eggs across the country, according to newsletters and other documents that United Egg sent to its members.

After three years without significant exports, United Egg shipped nearly 100 container loads, or 24 million dozen fresh eggs, to Europe and the Middle East at the end of 2006 and early 2007, industry participants say. Each member was required to provide a share of the sale, prorated by flock size. The orders were sold at below the prevailing U.S. price for fresh eggs, United Egg said.

Two Minnesota producers are included in the investigation.

Golden Oval Eggs and Michael Foods � noted in filings with the SEC this spring that they had been subpoenaed by the U.S. Attorney�s Office in the Eastern District of Pennsylvania.

The subpoenas requested documents for the period between Jan. 1, 2002 through March 27, 2008 relating �primarily to the pricing, marketing, and sales of our egg products,� both companies wrote in their 10-Q filings.

Farmers have always had scope to engage in coordination of marketing through a series of antitrust exemptions. Interesting that the Bush Administration is choosing to test how far those exemptions go.

Labels: economics, food, Minnesota