Pilgrim's Pride Cuts

EAST TEXAS - Pilgrim's Pride, the country's largest chicken company in the United States and the second largest in Mexico today closed its plant in Bossier City, Louisiana.

The original announcement came back in mid-August.  The closure is blamed on skyrocketing grain prices driven up by its use in producing ethanol gas.  Twenty-three hundred workers nationwide will be laid off.  "Disappointed that the plant closed, it's going to change a lotta lives, you know people have been here for 17, 20 years, no severance pay so if they don't have vacation, after that last check, that's it for them, and all the hard work they put in, that's it," said one employee.  Some workers will remain at the Bossier City plant for the next two weeks, tearing down equipment.

In a news release the company said their plan is to idle processing plants in Clinton, Arkansas and Bossier City "as 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."

Last month the company was able to get a temporary covenant waiver from its lenders, which is "a definitive written agreement with its lenders to temporarily waive the fixed-charge coverage ratio covenant under its credit facilities through October 28, 2008.  The lenders also have agreed to continue to provide liquidity under these credit facilities during this same 30-day period in accordance with the terms of the waiver agreement."

A September news release says, Pilgrim's Pride had requested the temporary waiver after notifying lenders that it expects to report a significant loss in the fourth quarter of fiscal 2008, which ended September 27, when it files its Form 10-K for such period.  The company attributed the anticipated loss to high feed-ingredient costs, continued weak pricing and demand for breast meat, and the significant negative impact of hedged grain positions during the quarter.  The company does not anticipate that any significant hedging gains or losses will be recognized beyond the fourth quarter of fiscal 2008 on the few positions that remained open past the end of such period.

Clint Rivers, president and chief executive officer for Pilgrim's Pride stated in August, "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."

"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.

Company officials have not announced any plans for closing plants in Lufkin or Nacogdoches, however, Ray Atkinson, Director of Corporate Communications told East Texas News today (Friday)they would have a better idea of the future for those plants by the end of October.

We'll have more on Pilgrim's Pride on the East Texas news and on ktre.com.