Chicken Supply Situation Prompts Pilgrim's Pride to Close Two Facilities

August 11, 2008 05:26 AM

Pilgrim's Pride Corporation  today announced plans to idle a chicken processing plant in Clinton, Ark., and a further-processing facility in Bossier City, the company seeks to increase operating efficiency and improve profitability as they cope with high feed costs and an oversupply of chicken on the market.

When completed, the idling of the Clinton processing plant will result in an approximate 1.25% incremental increase in the company's previously announced production cutback heading into the fall.

Meanwhile, value-added items currently produced in Bossier City will be shifted to other Pilgrim's Pride further-processing facilities. Pilgrim's Pride plans to keep both plants idle until it believes that industry margins can be sustained at more normalized levels of profitability should these or our other production cutbacks be reversed. The idling of the two plants will eliminate a total of approximately 600 positions.

The firm said it will provide transition programs to employees whose positions are eliminated to assist them in securing new employment, filing for unemployment and obtaining other applicable benefits.

The firm detailed that market prices for chicken breast meat are currently at $1.33 per pound, well below the prior five-year average for August of approximately $1.63 per pound, and significantly below the average price of more than $1.80 just four years ago.

"Over the past six months, Pilgrim's Pride has taken a number of proactive steps to strengthen our competitive position amid a very difficult operating environment," said Clint Rivers, president and chief executive officer. "These steps include the production cutbacks for the second half of fiscal 2008, the closure of a plant in North Carolina and seven distribution centers, and the consolidation of our tray-pack operations in El Dorado, Ark., to six other case-ready sites. Those changes, when combined with today's announcement, will result in the elimination of nearly 2,300 positions."

Since earlier actions by the company or others in the industry have not resulted in improved prices for their products, Rivers said, "It is now clear that more significant, decisive action is necessary. In addition, EPA's disappointing decision to reject the request for a partial waiver of the 2008 Renewable Fuel Standard for corn-based ethanol assures that high grain prices are here to stay for the foreseeable future."

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