Latest Victim of Food Inflation: Chicken Producers

Pilgrim's Pride will close nearly half of its U.S. distribution centers.

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Poultry producers are feeling the pinch of high grain prices: Pilgrim's Pride, the nation's largest, says it's closing a chicken-processing complex and six of its 13 U.S. distribution centers (incidentally, this closure doesn't affect the one near my parents' place in eastern Texas).

The closings, says Pilgrim's, are in response to a "crisis" facing the U.S. chicken industry: soaring feed costs resulting from increased production of corn-based ethanol, which has raised demand for corn and, hence, prices. The company is also reviewing other production facilities for potential closure and consolidation.

To blame, says CEO Clint Rivers, is the U.S. government's policy of subsidizing ethanol production: "The cost burden is already enormous, and it's growing even larger," Rivers said in a statement. "Based on current commodity futures markets, our company's total costs for corn and soybean meal to feed our flocks in fiscal 2008 would be more than $1.3 billion higher than what they were two years ago. We simply must find ways to pass along these higher costs."

Shares of the company jumped nearly 3 percent Wednesday on the notion that less chicken production will boost prices, but those gains have evaporated so far today.

Meanwhile, CNBC's Jim Cramer favors hogs. His case: Unlike beef (and chicken) prices, hog prices are falling, and people are trading down for pork.


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