A truck full of chickens, speeding toward a Pilgrim’s Pride plant in Nacogdoches, Texas, hit a sharp bend in the road and flipped, spilling blood, feathers and clucking birds onto the highway.
“I wasn’t running but 50 miles per hour,” the truck driver told a local newspaper, The Daily Sentinel.
A sheriff’s deputy at the scene of the Oct. 13 accident reckoned it was the third poultry-truck rollover on that curve this year.
The financial carnage at Pilgrim’s Pride, of Pittsburg, Texas, is even worse. Its stock closed Tuesday at $1.40, down 95 percent from its 52-week high.
“A combination of weak chicken prices, high feed costs, slack food service demand and high leverage has led to uncertainty with respect to Pilgrim’s Pride as a going concern,” Deutsche Bank North America analyst Christina McClone wrote to investors last week.
The driver of the chicken truck put it more succinctly: The “strap broke, and the load shifted.”
Pilgrim’s Pride just had to be No. 1. Last year, it loaded its balance sheet with about $1.2 billion in debt to acquire Gold Kist. The deal put it ahead of Springdale, Ark.-based Tyson Foods, which had long led the pecking order. But where was Chicken Little when he was needed most?
On Monday, Pilgrim’s Pride announced that its lenders had yet again agreed to extend credit facilities. It now has until Nov. 26 to avert another big spill.
Investment banker Lazard Ltd. has been hired to hunt down capital, and the company has said it won’t file bankruptcy, even as it flaps around like a chicken with its head cut off.
Pilgrim’s Pride got a pretty good plucking when commodity prices skyrocketed in the summer. Naturally, it hedged. But then, prices plunged. And the company got plucked again.
It was kind of like this chicken joke on Pilgrim’s Pride’s own website: “What goes peck, peck, peck boom? A chicken in a minefield.”
The company has said its hedging strategy is likely to lead to a “significant” fourth-quarter loss, on top of the $53 million it lost in its third quarter. But, at least for now, the dip in commodities prices has reduced about $1.1 billion worth of annual costs for chicken feed.
Perhaps the company could recover with a government bailout, just like banks, investment houses, insurance companies, automakers, airlines and everyone else in line.
With a name like Pilgrim’s Pride, surely Uncle Sam could justify taking an equity stake. John McCain or Barack Obama could make the same promise Herbert Hoover made in 1928: “A chicken in every pot.”
Pilgrim’s Pride reported $7.6 billion in sales for its 2007 fiscal year. The company commands about 23 percent of the chicken market; Tyson has less than 19 percent.
Tyson’s stock is down 59 percent from its 52-week high, trading at $7.99, but its healthier liquidity leaves it well-positioned for the slump, Stephens Inc. analyst Farha Aslam wrote in a research note Monday.
Gold Kist may turn out to be the kiss of death for Pilgrim’s Pride.
Just goes to show that if you move too fast, or load too many chickens, the strap could break, and you might end up making chicken ragout.
Al Lewis: 201-938-5266 or al.lewis@dowjones.com
