Turkey plant closing in Raeford will eliminate 950 jobs

dbracken@newsobserer.comMarch 14, 2013 

  • Poultry’s woes in North Carolina

    With its announcement Thursday, House of Raeford Farms becomes the latest poultry producer in the state to cite elevated feed costs as a reason for scaling back operations, delaying expansions or closing entirely.

    The largest processor to close in North Carolina was Townsends, which filed for bankruptcy in December 2010 and was later taken over by a Ukrainian investor. The Ukrainian shuttered the operations just months after restarting them – again citing corn prices as one of the main reasons – which resulted in the loss of more than 1,000 jobs in Siler City and Mocksville.

    The entire cost structure of the poultry industry is based on corn being priced at $3 to $5 a bushel. But prices have remained well above that in recent years and are now hovering around $7 a bushel.

    House of Raeford blamed government mandates for ethanol production as the reason corn prices remain high in its press release Thursday. The federal government subsidizes farmers to grow corn for ethanol. Last year’s drought in the Midwest also caused corn prices to soar.

    Staff writer David Bracken

The state’s poultry industry suffered another blow Thursday as House of Raeford Farms announced it will close its turkey slaughtering plant in Raeford that employs 950 people.

The company is also shuttering its turkey hatchery in Rose Hill and ending its relationship with about 140 turkey farmers in eastern North Carolina.

The slaughterhouse is by far the largest employer in Raeford, a city of fewer than 5,000 people just south of Fort Bragg, and its workforce is largely made up of the working poor.

“With a low-wealth county like ours, if you lose three or four jobs that’s traumatic, but 950 is a major hit,” said Don Porter, executive director of the Raeford-Hoke Economic Development Commission. “… These are poor people who we’re really going to have to try and find some way to get them back to work. That’s a major concern.”

House of Raeford’s decision is the latest example of how the high price of corn – the main ingredient in chicken and turkey feed – is eroding profits in one of the state’s largest industries. The family-owned company said in a statement that elevated corn prices, as well as falling turkey prices and flat turkey consumption in recent years, have made the business unprofitable.

Getting out of the breeding and slaughtering business will allow the company to focus on increasing chicken production and expanding its lines of fully cooked turkeys and chickens over the next several years. Chickens now account for more than 90 percent of House of Raeford sales. Based in Rose Hill in Duplin County, the company will still employ about 2,300 people in North Carolina after the closings, including 400 at a plant in Raeford where they cook turkeys to package and sell in grocery stores.

A valuable N.C. commodity

North Carolina ranks second nationally in turkey production behind Minnesota. The industry accounted for more than $772 million in sales in 2011, making turkeys the state’s third-most valuable commodity behind broilers and hogs. More than 75 percent of the state’s turkeys are produced in just five counties – Sampson, Duplin, Wayne, Union and Onslow.

The economic effects of House of Raeford’s decision will extend far beyond the lost jobs. A similar ripple effect played out when Townsends, another major poultry operator in the state, closed its chicken facilities in Siler City and Mocksville.

In addition to being the largest employer, House of Raeford is also the largest water user in Raeford. City Manager Mike Wood estimated the company accounted for $1 million in water and sewer revenues annually.

“That’s probably 30 percent at least of our water and sewer budget,” he said. “It’s going to be extremely difficult to be able to make that up with a rate increase.”

House of Raeford’s network of turkey farmers also faces an uncertain future. Farmers typically borrow large sums of money upfront to build houses for their birds and are dependent on a processor to provide them with turkeys and turkey feed to keep their operations running.

House of Raeford said it will work with individual growers to see whether they have interest in transitioning to raising chickens. But such a move would require farmers to make significant investments.

“A lot of their turkey grower houses have got a lot of age on them,” said Jesse Grimes, a professor and extension turkey specialist with N.C. State University’s Poultry Science Department. “I’m not sure how many people are going to elect to switch to broilers and invest that much money.”

Violations cost millions in fines

House of Raeford has had its share of worker-related problems.

In 2009, the company agreed to pay a $1.5 million fine and overhaul its hiring practices under an agreement that allowed a subsidiary to avoid prosecution on federal immigration charges. In October, the U.S. Department of Labor said it had caught the company illegally putting minors to work in a hazardous job. Regulators fined the company $12,400 for violating child labor rules at its Teachey plant in Duplin County.

And earlier this month, a federal judge sentenced the company to two years of probation and fined it $150,000 for 10 counts of knowingly violating the Clean Water Act at the Raeford slaughterhouse. The company has also been ordered to pay a special assessment of $4,000.

The violations took place several years ago while the company was subject to a consent order with the city that required House of Raeford to construct a new pre-treatment system. Dave Witter, a spokesman for House of Raeford, said the sentencing played no role in the company’s decision to close the plant.

Two turkey processors left

After its closing, North Carolina will have two turkey processing facilities. Butterball, which is based in Garner and is the country’s largest turkey producer, operates a plant in Mount Olive, and Prestige Farms has one in St. Pauls in Robeson County.

Grimes said House of Raeford’s decision makes sense when you consider turkeys account for a small percentage of the company’s overall business.

“They probably figured if they put the same effort on the broiler side they’ll get better returns,” he said. “Broiler consumption has been pretty steadily increasing whereas turkey consumption in the U.S. and pretty much around the world has kind of been flat for a long time.”

Grimes said because feed accounts for between 75 and 80 percent of the cost of turkey production, producers have few options if they want to stay in business.

“The price of the product needs to go up to support the rise in feed costs,” he said. “If you’re not getting more efficient and you’re not getting an increase in the price of the product itself, it puts a lot of people in a big bind.”

Bracken: 919-829-4548

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