Food is the body's fuel, and increasingly, that of cars, factories and
our homes. And that's creating friction, and bankruptcy, throughout the
American heartland.
Pittsburg, Texas-based Pilgrim's Pride Corp.,
one of the nation's largest chicken producers, filed for Chapter 11
bankruptcy protection on Dec. 1 and is a member of Food Before Fuel,
which is an interest group that promotes rolling back laws mandating
the production and use of renewable fuels such as ethanol made from
foodstuffs such as corn. Corn is also used for chicken and other animal
feeds.
Continue reading below
"Soaring feed ingredient costs fueled by the federal government's
ethanol mandate has created a crisis in our industry, the true effects
of which are only just beginning to be felt by consumers in Texas and
other states in the form of higher food prices," claimed the company's
founder and chairman, Lonnie "Bo" Pilgrim.
Pilgrim's Pride attributed its bankruptcy filing to ballooning chicken feed costs, which Food Before Fuels asserts will continue to climb as long as Congress subsidizes the conversion of corn to fuel.
But the ethanol industry, too, has been hit by the bankruptcy bug, and for the same reasons: high raw material costs.
Sioux
Falls, S.D.-based VeraSun Energy Corp., which accounts for 14% of the
total ethanol production capacity in the U.S., filed for bankruptcy on
Oct. 31 when its highly leveraged financial position left it unable to
absorb higher corn costs. Pratt, Kan.-based Gateway Ethanol LLC and
Mason City, Iowa-based Freedom Fuels LLC filed for bankruptcy in late
October and early November, respectively.
Seems the only ones
benefiting may be the corn farmers. Perhaps Congress should end the
subsidies, since the ethanol industry obviously isn't deriving any
positives from them, anyway. And now other industries are being affected, too. Just food for thought. - Carolyn Okomo
Comments
This article and the quotes by Mr. Pilgrim are extremely misleading. Neither ethanol subsidies nor higher corn prices are the reason for Pilgrim Pride's demise. According to Pilgrim Pride's most recent quarterly SEC filing, the primary reasons for their increased cost of goods include (i) an ill-fated acquisition of Gold Kist, (ii) increased energy costs, (iii) operational inefficiencies and (iv) labor shortages due to heightened governmental immigration enforcement efforts. It is interesting to note that corn prices have dropped from a high of over $7.75 per bushel in July 2008 to under $3.00 the week that Pilgrim Pride filed bankruptcy. It sounds like that Mr. Pilgrim is trying to pass the buck for his poor business decisions. Perhaps Mr. Pilgrim should have spent more time running his company than spending his time and his shareholders' money chasing the ethanol bogey-man.