FARMERVILLE, La. (AP) -- Foster Farms has delayed an expansion at its Farmerville chicken processing plant that would have added 29 poultry farmers to the company's list of contract growers because of a spike in corn prices, a company executive said Wednesday.
Ira Brill, Foster Farms' director of marketing services, said none of the 100 current contract growers would be affected and neither would there be a reduction of the plant's 1,300-person work force.
Corn prices hit two-year highs shortly after the U.S. Environmental Protection Agency's decision this month to approve increasing allowable ethanol gasoline blends from 10 percent to 15 percent, and the U.S. Department of Agriculture lowered its forecast for production.
Corn, which remains significantly above $5 per bushel, is the primary feed for chickens.
"That places enormous pressure on our input costs, and for that reason we can't go forward with our expansion plans," Brill said.
While Brill said none of the 29 new growers had entered contracts with the company, Foster Farms will provide no-interest loans to any of those growers to cover their investment. He said if the company hasn't contracted with the growers within 12 months, the loans will be forgiven.
"It's in our interest to keep these growers whole because we want to have them in the future," Brill said. "If people throw in the towel, it doesn't benefit us." Brill said the expansion plans are delayed, not shelved.
"If and when the commodity market corrects itself, we'll move forward," he said. "In the long run we believe we'll reach full capacity at the plant. We're committed to that." Louisiana Agriculture Commissioner Mike Strain said he is aware of Foster Farms' decision.
"We're working with the company to get the expansion back on track as soon as possible," Strain said. "They've been a good partner with the state."
Foster Farms bought the plant from Pilgrim's Pride in 2009 with the help of $50 million from the state. The company has exceeded its contract requirements with the state, which called for a minimum 1,100 jobs by this time in exchange for the incentives.
Information from: The News-Star, http://www.thenewsstar.com
Copyright 2010 The AP.