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Pilgrim's Pride to Close Seven Facilities

posted on March 14, 2008


NEW YORK (AP) - Pilgrim's Pride Corp. said Wednesday it will close a chicken-processing plant and six distribution centers and lay off 1,100 workers because of soaring feed costs and a glut of chicken.

The company is considering changes at other plants, including possible closures, consolidation or changes in product lineups.

The company said it would close a processing plant in Siler City, N.C., affecting 830 employees. It will also close distribution centers in Oskaloosa, Iowa; Plant City and Pompano Beach, Fla.; Jackson, Miss.; Nashville, Tenn.; and Cincinnati.

Pilgrim's Pride said it expects to take charges of $35 million, or 33 cents per share, from the closures.

But investors appeared to like the decision. They sent Pilgrim's Pride shares up 68 cents, or 3 percent, to $23.50 in trading Wednesday. The shares are still 43 percent lower than they were six months ago.

Chief Executive Clint Rivers said at current prices, Pittsburg, Texas-based Pilgrim's Pride would spend $1.3 billion more on corn and soybean used in feed during this fiscal year than it did two years ago.

Rivers said the increases were unprecedented, and he blamed federal subsidies to producers of corn-based ethanol, which has resulted in more corn being planted for use in fuel. He said grains are basic to most food products, including feed used to raise poultry, and the full impact of higher grain prices haven't yet reached consumers.

"There is much more to come," he said in an interview. "We're spending out tax dollars to raise the price of our food to subsidize the ethanol industry."

Pilgrim's Pride buys about 325 million bushels of corn and 3.3 million tons of soybean meal each year. Corn prices have been rising since late 2006, and soybean meal prices have increased since the middle of last year as some soybean acreage was planted with corn.

Closing the North Carolina plant will cut nationwide production in the industry by less than 1 percent. Analysts say less production could give processors more power to raise prices they charge consumers and restaurants that buy their products.

The company hasn't decided what to do with the plant, which it picked up when it acquired Gold Kist Inc. a year ago. Rivers said the company could use some of its capacity to raise birds to supply two nearby company facilities if chicken prices rise.

"Earnings in the chicken industry are as bad as they have ever been," said Farha Aslam, an analyst for Stephens Inc.

Aslam said in a note to clients that production cuts are needed to improve the industry's fundamentals, and that the cuts announced Wednesday were "a start, but it is not enough to turn around the industry."

The closures followed Pilgrim's Pride's announcement Monday that it was getting out of the turkey business to concentrate on chicken.

Rivers said both moves had been in the works since the beginning of the year, before he was promoted this month from chief operating officer to replace O.B. Goolsby Jr., who died of a stroke in December.


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