Cost of feed delays chicken plant

Rising feed costs are forcing chicken producer Sanderson Farms to delay -- perhaps by as much as a year -- plans to build a $126.5 million plant in Kinston.

The decision comes two months after the Laurel, Miss.-based company said it would build a feed mill, hatchery and plant capable of processing 1.25 million birds a week. Construction was to begin this summer and wrap up by 2010, adding 1,500 jobs to Kinston, a city in Lenoir County.

But surging prices of corn and soybean meal, the primary ingredients in chicken feed, have made it increasingly difficult to predict costs, the company said. So it decided to hold off until prices stabilize.

Corn has doubled in the past year. Global demand has surged, and more of the crop is being used to make ethanol instead of livestock feed.

"The recent flooding in the Midwest has further affected this season's corn and soybean crops, creating more uncertainty," Joe F. Sanderson Jr., the company's chief executive, said in a statement.

Soaring expenses have hurt other poultry processors. Pilgrim's Pride, for instance, recently closed its chicken plant in Siler City, throwing 836 employees out of work.

Sanderson likely will wait to make a decision until March, when it will have better understanding of the 2009 corn crop, Mike Cockrell, Sanderson's chief financial officer, said in an interview.

"We need to get to this time next year," Cockrell said. "If things look good, then we can start baby steps toward the project, and by the fall be ready to make a decision. And we're not ruling out something ahead of that."

In the meantime, the company still plans to pay $6 million for the 750 acres needed for the facility, he said. The company still maintains a three-person office in Kinston and is going through the city's planning process.

"We are committed to Kinston and to North Carolina," Cockrell said. "We need the plant to service the customers. We're just going to be very deliberate and prudent."

The Kinston plant would be Sanderson's first in North Carolina. The state agreed to a maximum of $5.6 million in tax incentives over three years, based on the company meeting job and investment targets. Kinston and Lenoir County also offered tax breaks.

Executives met with city leaders on Thursday to reiterate their plans to move forward with the project.

"I can understand the business side, what the economics of the higher price of corn does to them," said Scott Stevens, Kinston's city manager. "But I'm hopeful. The sooner the better, in terms of construction. But I'm confident they'll still build in Kinston."