Pilgrim's Pride Corporation on August 11 announced plans to idle a chicken processing plant in Clinton, Ark., and a further-processing facility in Bossier City, La. Both moves, which are expected to be completed within 60 days, are part of the company's ongoing effort to operate more efficiently and return to profitability amid 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 percent 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. Pilgrim's Pride 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 company attributed the announcement to the continued imbalance in supply and demand in the U.S. chicken industry, which has led to market prices for breast meat that are unusually weak for the peak summer grilling season. Market pricing for breast meat is 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.
"With Labor Day approaching and no indication that the actions taken to date by Pilgrim's Pride or other industry members are having a positive effect on selling prices for our products, 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. While we had sincerely hoped to avoid further facility closures or consolidations, we recognize that we must do everything in our control to pass along higher input costs. We believe the actions announced today, while painful, are needed to position Pilgrim's Pride to emerge from this down cycle as a much stronger, more efficient competitor," he explained.
Pilgrim's Pride Corporation is the largest chicken company in the United States and Puerto Rico and the second-largest in Mexico. Pilgrim's Pride employs approximately 53,500 people and operates 36 chicken processing plants and 12 prepared-foods facilities. Pilgrim's Pride products are sold to foodservice, retail and frozen entree customers. The Company's primary distribution is through retailers, foodservice distributors and restaurants throughout the United States and Puerto Rico and in the Northern and Central regions of Mexico.
