Cagle's in Chapter 11 as Georgia's poultry industry under strain

Cagle's, one of Georgia's biggest chicken processors, became the third U.S. poultry company to file for Chapter 11 bankruptcy in the past 10 months. It was the latest bad sign for the industry, worth $4.2 billion to Georgia farmers. Production prices have increased as prices for chicken have dropped. As Georgia producers lower their output

Cagle's, one of Georgia's biggest chicken processors, became the third U.S. poultry company to file for Chapter 11 bankruptcy in the past 10 months.

It was the latest bad sign for the industry, worth $4.2 billion to Georgia farmers. Production prices have increased as prices for chicken have dropped. As Georgia producers lower their output to get in balance with demand, employment in processing plants has dropped.

Cagle's, which began 60 years ago as a chicken shop in downtown Atlanta, listed $92 million in assets and $62.9 million in debts in papers filed Wednesday in the U.S. Bankruptcy Court in the Northern District of Georgia. Chapter 11 bankruptcy protects a company's assets while a business continues to operate and work out payments with creditors.

It is the 21st largest producer in the U.S., according to the U.S. Poultry and Egg Association.

Calls to Cagle's and the company's attorney were not returned.

The industry has been under heavy economic pressure in the past year, said John McKissick, an agricultural economist at the University of Georgia. Feed prices, which represent half or more of the price of chicken on market shelves, doubled and fuel prices rose as prices for chicken fell and consumption dropped slightly. Improvement will take time, he said.

"They are going to be under tremendous strain for next year," McKissick said of the industry.

Poultry is the state's leading agricultural output, says the state Department of Agriculture. Georgia ships chicken across the U.S. and the world.

The industry, including companies that sell to or service chicken producers, employs about 100,000 workers in Georgia, said Michael Lacy, the head of the University of Georgia's poultry science department.

The state Department of Labor says the number of workers in processing plants peaked in 2007 at more than 33,000. As of last March, that was down about 10 percent to 29,887.

Cagle's laid off about 300 people at its plant in Pine Mountain last June to cut costs and production, a company financial report said.

The report said feed prices had increased 68 percent compared with the same time period in 2010. The publicly traded but still largely family-owned and -operated company had cut administrative expenses and reduced executive compensation and insurance costs. It lost $5.7 million for the quarter even with a 4 percent increase in sales.

Cagle's employed 1,900, according to Hoovers, a firm that tracks companies. That figure is from March 2011, before the layoffs.

Lacy said, "I'm sure there have been some cutbacks, but Cagle's is still going to be processing chicken. They still need people to grow and serve and sell those birds. I don't think there will be significant cutbacks in employees, but there will be some."

Bankruptcy documents say Cagle's owes more than 1,000 creditors, including a string of feed companies, transportation companies, utilities and American Express.

Two other producers -- Townsends and Allen Family Foods, both of Delaware -- also filed Chapter 11 since last December. Both are being purchased by other companies.

The industry is cyclical, Lacy said.

"But this downturn has been a little deeper and longer than we are used to. But I would think we have to be close to the bottom of the downturn."

Mike Giles, president of the Georgia Poultry Federation, said, "There have been down cycles in the past and there will be more in the future, but the overall situation occurring now is one of the most challenging that our industry has ever faced."

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