High feed costs drive Delaware poultry firm to seek sale to rival

By Agri-Pulse staff

© Copyright Agri-Pulse Communications, Inc.


WILMINGTON, Delaware, June 9 - Allen Family Foods of Seaford, Delaware, an integrated poultry processor with plants in Delaware and Maryland, will ask a federal bankruptcy court Friday for permission to continue business as usual during bankruptcy proceedings that it hopes will end with a sale to nearby Mountaire Farms, the seventh-largest poultry operation in the US.

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The company said in court filings that it failed to meet the June 1 deadline to pay more than $82 million owed to Mid-Atlantic Farm Credit, citing a pinch between higher operating costs and lower poultry prices. It said that the leading adverse factor has been a steady and significant rise in the cost of feed ingredients [as] the combination of unsustainable ingredient costs and reduced finished poultry prices has directly led to the company's financial woes.” In addition, “energy and gas costs that continue to rise and fluctuate in an unpredictable manner,” it said.


Allen was unable to repay debt of nearly $82 million to Mid-Atlantic Farm Credit and a smaller amount owed by M&T Bank of Wilmington, according to a statement from Brian G. Hildreth, its vice president and secretary-treasurer. He said that Mountaire made a firm offer to buy Allen's facilities, which include egg-laying facilities in North Carolina, a feed mill and rendering operation in Delaware and 24 company-owned farms. Allen asked the court to approve a bidding process in which other potential buyers would have an opportunity to outbid Mountaire.


Hildreth's statement described Allen's systematic attempt to overcome the cost-price squeeze, including an effort to capitalize on the market for antibiotic-free chicken for the private label market and its own Nature's Sensation brand name. It expects that 5 percent of this year's volume - about 18 million pounds -- will be antibiotic-free, with an all-vegetable feed diet.


Allen's Hatchery, founded in 1919, initially sold chickens to farmers for egg production but grew through acquisition and expansion to employ 2,273 people and process some 2 million birds a week and sell 400 million pounds of poultry products per year. It exports about 3 percent of its products to Hong Kong, the Philippines, China, Jamaica and other countries. Allen has contracts with 233 independent farms in the Delmarva Peninsula.


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