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Pilgrim's plant closing could be good news for East Texas

From Staff and Wire Reports
July 30, 2011 at 11 p.m.

The closing of a Pilgrim's Pride plant in Dallas could provide a boost to employment in East Texas.

Pilgrim's Pride Corp., the big chicken processor founded in 1946 in Pittsburg, said Friday that it would close its chicken-processing facility in Dallas within 60 days.

About 1,000 hourly workers are employed there. Those jobs will be consolidated into several other Pilgrim's facilities in the region, including processing and prepared-foods plants in Mount Pleasant.

Pilgrim's also has plants in Lufkin, Waco and Nacogdoches.

"It sounds like it might be good news for us," said Mount Pleasant City Manager Mike Ahrens, though the company did not say what portion of the production or jobs might be transferred there.

One big reason for the move, Pilgrim's said, is to eliminate the cost of transporting live birds from its growers in Northeast Texas to Dallas, then shipping rendering remains from Dallas back to its protein conversion plant in Mount Pleasant.

Growers who supply birds to the Dallas plant will begin supplying other company plants after the consolidation is complete in the fall, a company spokesman said.

Pilgrim's must cut costs; it reported Friday it lost $128 million in the second quarter as high corn prices and chicken surpluses hit its bottom line hard.

"While the decision to close a plant and eliminate jobs is always painful, we must make better use of our assets, given the challenges facing our industry," said Bill Lovette, Pilgrim's president and CEO. "A key component of that effort is improving our capacity utilization through production consolidation and other operational changes. By closing the Dallas facility, we can consolidate that production volume at three other plants and help those sites run closer to full capacity."

The company said its cost for corn feed in 2011 has climbed by $400 million over last year. Those prices have risen as more of the nation's corn crop goes to ethanol production, rather than to feed livestock.

Chicken prices also are low as producers are oversupplying the market. That should turn around over the next few months as chicken producers respond, reducing supply by putting fewer eggs into incubators.

For the second quarter, Pilgrim's said its loss of $128.1 million, or 60 cents a share, compared with a year-earlier profit of $32.9 million, or 15 cents a share. Sales rose 13 percent to $1.92 billion.

Pilgrim's recently has been defending itself in federal court in Marshall against claims from growers who allege the company closed plants and ran them out of business.

They say Pilgrim's violated the Packers and Stockers Act through its plan to manipulate the price of chicken, creation of an insider system of advantages, and retaliation for, and termination of, growers who refused to continually make capital investments in their facilities.

Pilgrim's said it closed plants during bankruptcy reorganization in 2008 to save costs.

It emerged from Chapter 11 bankruptcy protection in late 2009, a year after the filing. It sold a majority stake to Brazilian beef giant JBS.

In June 2010, the company's headquarters was moved from Pittsburg to Greeley, Colo.



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