Peco Foods to expand in Arkansas

Tuesday, March 11, 2014

The leaders of Randolph and Clay counties said Monday that they expect to see the economic effects of a new $165 million poultry operation ripple across the state’s northeast as Alabama-based Peco Foods Inc. expands its operations in Arkansas.

Mark Hickman, Peco Foods’ president and chief executive officer, said the project will create 1,000 new jobs with the addition of a hatchery and poultry-processing plant near Pocahontas and a feed mill in Corning. In addition, Hickman expects additional investment for tasks that support the plant, such as growing the birds and supplying feed. Details of the project were announced Monday morning at a news conference at the state Capitol.

“We will use 339,000 bushels of corn and 24 tons of soybean meal on a weekly basis,” Hickman said. “It’s very important to us that we’re helping farmers increase their income and better provide for their families.”

Peco, a privately held company based in Tuscaloosa, supplies boneless breast products for customers such as Wal-Mart Inc., and restaurant chains such as Buffalo Wild Wings, Hickman said. About 20 percent of the company’s products are exported to Asia and western Europe.

Randolph County Judge David Jansen said in addition to jobs, the project will bring new residents and property tax revenue to both counties.

“I don’t think anybody has got their arms around this yet,” Jansen said after the announcement.

Jansen said he and other community leaders have been working on the project with Peco and state economic development officials for about nine months. He said he was pleased with the quality of work done by Peco and others.

Hickman said once construction starts, it will take 12 months to complete the new hatchery, 16 months for the processing plant and 18 months for the feed mill.

He said workers at the processing plant will be paid on average $10.86 per hour plus benefits while workers at the feed mill will receive on average $13 per hour plus benefits.

In addition to the new Peco employees, Hickman said locally grown grain and chickens will supply the facilities. He estimated that about 640 new broiler, pullet and breeder houses will be needed, which likely will be operated by 90 local farmers.

“Anytime we can announce good jobs, it’s a good day for Arkansas,” Gov. Mike Beebe said in announcing the project. He noted the Peco Foods operations will be in a region of the state where such announcements are rare.

The unemployment rate in Clay County stood at 12.2 percent in December while the rate was 9.3 percent in Randolph County, according to the Arkansas Department of Workforce Services. Statewide, the unemployment rate was 7.4 percent.

Peco Foods is the eighth-largest poultry producer in the country and prepares about 24 million pounds of poultry each week for retail grocers and food-service companies.

The company was provided incentives to locate its new facilities in Arkansas.They include a $3.5 million federally funded community block grant for infrastructure needed to support the Pocahontas hatchery and processing plant, as well as a $1 million community development block grant for the Corning feed mill.

The federal Delta Regional Authority also contributed $231,000 toward the land needed by the project, while Randolph County, Pocahontas and the Northeast Arkansas Regional Intermodal Facilities Authority combined will contribute another $450,000 for infrastructure needs.

Grant Tennille, executive director of the Arkansas Economic Development Commission, said the company will also take advantage of several performance-based programs, including Advantage Arkansas, which provides an income tax credit based on total payroll of new jobs, and the Tax Back program which provides a refund on sales taxes levied on building materials, machinery and equipment. The value of these credits will depend on the company’s investment, he said.

Peco is also taking advantage of a decision by Randolph County’s Quorum Court to issue up to $135 million in revenue bonds to help lower the cost of financing the project, including land and a related waste-water treatment facility. Clay County Judge Gary Howell said his county has approved a $36 million revenue bond issue for the Corning feed mill and is in the process of developing a plan to improve road access to the mill site.

Hickman said the company expects to break ground on the feed mill in April. Work on the processing plant and hatchery will begin in July.

After the announcement, Hickman said Arkansas was chosen for the expansion for the quality of its workers, access to feed grains and the availability of enough land that allowed it to build its complexes on two sites. Connected by U.S. 62/67, Corning and Pocahontas are about 26 miles apart.

Hickman said feed represents the highest cost of producing chicken. “We’re hoping that sitting right in the middle of communities where there is a source of grain will give us a competitive edge,” Hickman added.

Marvin Childers, president of the Poultry Federation, which represents the poultry industry in Arkansas, Missouri and Oklahoma, said poultry is a $3.8 billion industry in Arkansas, making up about 40 percent of the state’s total agricultural output.

In 2012, the state produced 5.7 billion pounds of chicken, 29 million turkeys and 3 billion eggs, Childers said, adding that “Arkansas is the only state that ranks among the top 10 producers of broilers, turkeys and eggs,” among the 50 states.

He said the Arkansas location chosen by Peco Foods will reduce its production costs because corn and soybeans raised locally will go directly from farms to the feed mill, reducing transportation costs and enabling the company to buy direct.

Peco Foods also has facilities in Alabama and Mississippi. The company came to Arkansas in 2011 when it purchased the operations of the bankrupt Townsends Inc. for $51 million. That deal included a processing plant in Batesville and a feed mill in Newark. Hickman said the Arkansas expansion will bring the number of employees for Peco to 6,000 companywide.

Hickman said those two facilities would be unaffected by the expansion in Pocahontas and Corning. The company spent $13.8 million in 2012 improving its existing Arkansas operations.

Front Section, Pages 1 on 03/11/2014