Poultry industry lays an egg in N.C.

The two biggest producers post huge losses, and 20,000 state workers fret

Rising costs, wilting demand and a down economy have put poultry processors in a tight spot. That could signal tough times for large swaths of the state that have a stake in the industry.

The chicken industry's biggest producers, Pilgrim's Pride and Tyson Foods, reported major losses last quarter, and industry watchers say they're not sure when to expect a turnaround.

What that means for the more than 20,000 people in North Carolina who work in the industry and local communities with ties to the business isn't yet clear. Some officials say they're just waiting -- and trying not to worry.

"We're just hoping we won't lose any growers in Chatham County," said Glenn Woolard, director of the county's agricultural extension center. Chatham is one of the state's top chicken-producing counties.

Chicken farmers there and in nearby Harnett have been concerned since Pilgrim's Pride closed its processing plant in Siler City this year. So far, Woolard said he doesn't know of any farmers in Chatham who lost their contracts, but that doesn't mean they haven't felt the effect.

"Some have been held out of production," he said. "Some [chicken] houses are empty longer between flocks. That affects income."

Pilgrim's Pride, the country's largest chicken producer, has been pelted by rising costs and debt. Its 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.

Its stock closed Tuesday at $1.32, 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, in part because of rising feed prices, 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, feed costs in the third quarter rose $266 million over the same period last year, 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.

Better times ahead?

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.

The poultry industry is important to both North and South Carolina. Together, the two states are home to about 50 processing plants. North Carolina ranks second in the nation in turkey processing and fourth in chicken processing. North Carolina poultry plants process more than 700 million chickens a year.

Pilgrim's Pride employs about 1,900 workers at several facilities in the state, including at a feed mill in the Chatham community of Bonlee, a hatchery in Siler City and a processing plant in Sanford. Tyson Foods employs more than 5,500 people in North Carolina, company spokesman Gary Mickelson said.

North Carolina has already felt the effects of the pinched industry. When Pilgrim's Pride closed its Siler City plant this summer about 800 people lost their jobs. Then recently, the company notified 44 growers in the state it is terminating their contracts.

"It's really been a challenging time," Atkinson said. "We're just continuing to look at all our options."

Pilgrim's Pride and Tyson aren't the only poultry companies in the state. In Chatham County alone, farmers also have contracts with Perdue, Mountaire, Allen's Hatchery and Townsend, which is based in Siler City. About 85 percent of Chatham's gross farm income comes from the county's 150 poultry farms, said Woolard, the extension director.

"It affects the economy in the whole area," he said.