Processors of poultry facing big challenges

Rising costs, wilting demand and a down economy have put poultry processors in a tight spot. That could signal tough times for the Carolinas, which have a large stake in the industry, local officials and poultry experts say.

The chicken industry's biggest producers, Pilgrim's Pride Corp. and Tyson Foods Inc., reported major losses last quarter, and experts say they're unsure when to expect a turnaround.

What that means for workers and Carolinas communities with ties to the business isn't yet clear. Some officials say they're just waiting – and trying not to worry.

“The whole situation is troublesome,” said Maurice Ewing, president of the Partnership for Progress in Union County, one of the state's top chicken-producing counties. “‘Worry' is too strong a word, but we're watching.”

Pilgrim's Pride, the country's largest chicken producer, has been pelted by rising costs and debt. The company's stock tumbled 40 percent last month after it reported big losses and the possibility of defaulting on its loans. Some analysts have said it could file for bankruptcy or be bought by a competitor. It closed Monday at $2.15, down from a 52-week high of $30.15.

Company officials said Monday that they'd agreed to an extension with their lenders through Nov. 26. The company has been working on a business plan that addresses its financial challenges, it said.

The entire meat industry is hurting, partly because of rising feed prices over the past two years, said Richard Lobb, a spokesman for the National Chicken Council. Corn prices recently have dropped slightly to about $4 a bushel, but that's up from $2.40 two years ago, he said.

At Pilgrim's Pride, for instance, feed costs in the third quarter rose $266 million over the same period last year, company spokesman Ray Atkinson said.

National policies pushing ethanol fuel have driven up the cost of corn, and the rising cost of fuel has made ethanol more attractive, Lobb said.

In addition, there's an oversupply of chicken, caused by weakened demand and shrinking exports to Russia and other countries, experts say. The economy is also an issue, cutting down on business at casual-dining restaurants where chicken is popular.

There are signs of a turnaround. Soybean and corn prices have begun to drop. Experts anticipate one of the largest corn crops on record. And fuel prices are dropping, meaning the price of feed could fall further.

Chicken producers are also encouraged by the fact that fewer chickens are being hatched this year, meaning fewer in the market, some said.

Still, “it seems to be kind of a belt-tightening time,” Lobb said.

Much is at stake in the Carolinas, which have about 50 processing plants. North Carolina ranks second in the nation in turkey processing and fourth in chicken processing. N.C. poultry plants employ more than 20,000 workers and process more than 700 million chickens a year.

In South Carolina, poultry plants employ about 8,000 workers and process more than 200 million chickens annually.

Pilgrim's Pride has several facilities in the Carolinas, including a hatchery in Concord, feed mill in Wingate and chicken-processing plant in Marshville. Tyson Foods employs more than 5,500 people in North Carolina, including 1,600 at its Monroe poultry complex, company spokesman Gary Mickelson said.

North Carolina has already begun to feel the effects of the pinched industry. Pilgrim's Pride, which employs 1,900 workers in the state, closed a plant in Siler City earlier this year and announced this month that it would terminate contracts with 44 growers, said Atkinson, the company spokesman.

“It's really been a challenging time,” he said. “ … We're just continuing to look at all our options.”

Pilgrim's Pride and Tyson are among Union County's top employers, and five other major poultry companies have facilities there, said Jerry Simpson of the N.C. Cooperative Extension.

Ewing, Union's economic development official, remains optimistic.

“In Union, we're in pretty good shape,” he said. “People are still going to eat, and chicken is one of the most reasonable sources of protein you can find.”