Feed Price Rises Bring Lay-Offs at Perdue

US - Feed cost rise 20 per cent in a year have led Perdue to shed 24 positions.
calendar icon 19 October 2011
clock icon 4 minute read

Just a month after unveiling the Perdue School of Business at Salisbury University and a week after Governor Martin O'Malley visited Perdue's corporate headquarters to applaud the company's solar farm, the poultry giant announced lay-offs for two dozen employees in Salisbury, reports Delmarva Now.

Citing an increase in grain prices and a decrease in the poultry industry, Perdue eliminated 24 positions at its corporate office in Salisbury. The company said the eliminated positions are restricted to the corporate office and only account for about three per cent of its corporate workforce.

"The decision is part of a larger cost-savings effort in response to continued high grain prices and persistently weak poultry markets," said Julie DeYoung, a Perdue spokeswoman.

Higher grain prices are not just affecting the profit margins of Perdue but poultry companies throughout the country, according to Bill Roenigk, vice president of the National Chicken Council.

He said: "Poultry feed, which incorporates grain and soybeans ... is up about 20 per cent compared to this time a year ago. Another way to look at it is in September of 2008, it cost 25 cents to produce a live pound of chicken, and today it costs 45 cents. That's an 80 per cent increase in the cost over three years."

A range of factors have squeezed the amount of corn and soybeans available for poultry farmers in recent years. Drought and flooding have dwindled corn crops and the amount of corn going to ethanol production has increased – as has the amount of corn slated for export.

Mr Roenigk said the inadequate harvests of corn and soybeans have continued this year. While the prices have dropped in recent weeks, he said, they are guaranteed to go back up again.

He explained: "Last year, corn and soybean crop harvests were not adequate to fulfill the needs for ethanol, for feed and for export. It's been difficult, if not impossible, to pass on those higher feed costs to the consumer."

Perdue spends approximately 63 per cent of the cost of bringing a chicken to market on corn and soybean meal. Ms DeYoung said for every dollar increase in the price of corn Perdue sees, its expenditures increase by $100 million annually.

To compensate for the loss of revenue, Perdue spent the last year creating initiatives to reduce expenditures and restrict discretionary spending. She said the company has reduced marketing expenses, reduced capital expenditures, restricted travel, delayed wage increases for associates and limited corporate hiring to critical positions.

Ms DeYoung told Delmarva Now that the hard times are evident in the changes made by Perdue and by the bankruptcies of Townsends and Allen, as well as the financial losses at Sanderson.

She added: "Commodity markets remain very volatile. We've never seen adverse market conditions this bad or lasting this long. But we are optimistic that through the combination of cost savings, new markets and continuing industry cutbacks, Perdue will continue to be a competitive, trusted name in food and agricultural products."

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