State and local economic development staffers are bracing for layoffs at Allen's plants in Maryland. Both locations are on Mountaire's "want list." But the company says it can't discuss its plans for the facilities before it knows whether it will acquire them. A sale could be approved as soon as next month.
Cordova, population 520, is emblematic of the region's dependence on the poultry industry. The town is surrounded by chicken houses that stretch longer than football fields and by hundreds of acres of corn, soybeans and wheat — grains sold largely to the poultry industry.
Cars share the road with hulking combines. And along Cordova Road, the town's equivalent of Main Street, sits Allen's processing complex. Its employee base outnumbers the adults in Cordova. Workers stream in every morning from across the Shore, and the company has bused in some employees from as far afield as Baltimore — 60 miles distant.
"You just don't think about something like that coming to an end," said Teresa Dawson. Her family owns Tuckahoe Seafood across the street from the plant, selling crabs and produce to Allen employees and others — many connected to the poultry industry.
"I can't imagine what the long-term consequences would be," she said.
Charlie Rice, who opened Rice's Country Store down the street 40 years ago, would love to see the Allen complex stay open. But he says he doubts that will pan out because Mountaire is focused on expanding its Delaware plants.
"There's so much uncertainty," he said.
A corn problem
Allen got its start with a single hatchery in 1919. The family-owned company built and acquired locations across Delaware, Maryland and North Carolina, once employing nearly 2,300. Then it all unraveled.
The company did not return telephone calls seeking comment. But in its bankruptcy filing, it identified skyrocketing feed costs as the "leading adverse factor" affecting the business.
Feed corn cost $7.11 a bushel in May, more than double the $3.44 price a year earlier, according to the latest statistics from the USDA's Economic Research Service. Corn is the major component of chicken feed, followed by soybeans, whose price is up nearly 20 percent over the period.
Chicken feed is a poultry company's major expense. Every $1 increase in corn has added $10 million in annual costs, Allen said in the bankruptcy filing.
Corn prices have fallen below $7 in recent trading — amid chatter that less-costly wheat could take its place in animal feed — but still remain near historic highs. Explanations are many: high demand for animal feed around the world; corn going to ethanol at home, fueled by federal subsidies; speculation on the commodities market. And, on top of it all, depressed supply.
"It's pretty bad right here — the last appreciable rainfall was May 19," said Kennedyville grain farmer Brian Quinn, a past president of the Kent County Farm Bureau.
Rising fuel costs also have taken a bite.
But poultry companies don't have the pricing power to make up for cost increases. A USDA index that tracks wholesale prices for chicken parts shows a 6 percent decrease in the past year. What grocery stores charged shoppers for chicken parts rose slightly, according to the Consumer Price Index.
"The majority of chicken companies in the United States are losing money," said Bill Satterfield, executive director of the Delmarva Poultry Industry Inc., a trade group.
Diversification has helped some companies hang on. Perdue, the biggest player in the region, produces not just for wholesalers but also sells more profitable retail products — convenience foods such as nuggets and individually wrapped chicken breasts. Perdue AgriBusiness buys grain and sells it internationally. Together, Perdue Farms and Perdue AgriBusiness employ about 20,000 people.