High Cost of Chicken Feed Pushes Poultry Giant into Bankruptcy
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High Cost of Chicken Feed Pushes Poultry Giant into Bankruptcy

November 8, 2012

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The soaring cost of feed and nearly $100 million in debt prompted Zacky Farms LLC to file for bankruptcy, according to a report from Bloomberg Businessweek.

The poultry producer, based in Fresno, California, is looking to sell itself to its creditors, which would allow the company to continue its normal operations "without disruption," according to Zacky representatives.

The company says it is looking for bankruptcy help due to its ever-increasing debt load, which was caused in part by the rising cost of poultry feed.

Sources say that global food prices reached a record level this summer, thanks to major droughts in the United States and Russia, which forced a rapid increase in the price of corn and soybean, both key sources of food for poultry.

Due to the rising cost of farm inputs, meat and dairy farmers across the globe have been forced to cull their herds, according to sources. Zacky, according to documents filed in bankruptcy court, spends nearly $2 million a week on feed for roughly 600,000 chickens and 1.9 million turkeys.

According to a statement released by Zacky officials, their industry is under "severe stress" due to the "historically high" feed prices, which caused "significant operating losses" for its turkey and chicken divisions.

The drought in the U.S., which was the worst dry spell in 56 years, had a particularly unsettling impact on livestock feed, which jumped to a record $8.49 a bushel late this summer.

The company tried to avoid bankruptcy for several months, and was initially able to secure a $7 million loan from a trust that owns half the company.

The poultry giant, however, continued to struggle, and now needs to borrow an additional $71 million to keep its operations going during the bankruptcy.

This loan, presumably, will be provided by the poultry producer’s primary creditors, which include a prominent western financier and another farm.

In its prime, the company was able to process more than one million birds a week, which led to substantial revenues for the poultry company. But its goals are more modest now. By filing for bankruptcy, the company lived to see another day.


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