America’s biggest chicken producer became the latest victim of the credit crunch. Difficulty extending its credit lines, combined with soaring grain prices, forced Pilgrim’s Pride to file for bankruptcy protection today.

Pilgrim’s Pride also said that it was attempting to negotiate $450 million in financial from the Bank of Montreal to help it fight its way out of its financial black hole. The cash would be used to pay the wages of its 48,000 workers and continue the daily operation of its 35 chicken-processing plants.

It is the first big US meat company to be hit by the global economic turmoil.

The Texan company warned investors late on Friday night that it would report a loss of $802 million for the fourth quarter, which ended on September 27. It also postponed the release of its annual report for the full year until it had finished talks with its lenders.

The company’s credit lines were due to run out today, having already been extended three times since September, after Pilgrim’s Pride said that it would not be able to meet its debt repayments. It was due to make a $25.7 million interest repayment this week.

Shares in the company were halted at 62 cents each, down 46 per cent, before the bankruptcy filing was disclosed. The stock is down 98 per cent this year.

Pilgrim’s Pride had also been hit by the rising cost of corn and soybeans, which are used in animal feed, as well as an oversupply of chicken that lowered retail prices and made it impossible to claw back the cost of feed.

The company hired a chief restructuring officer in September, on the orders of its lenders.

The chicken producer expects to make a $13.4 million loss in the first quarter of 2009 on derivative contracts for feed ingredients.

Companies such as Pilgrim’s Pride have blamed higher feed costs on US Government subsidies that encouraged ethanol production. Making ethanol, a biofuel, requires huge amounts of corn, which has driven up the price of the grain.

Corn and other grain costs have also been pushed upwards by poor weather, which earlier this year put supplies at a 25-to-30-year low.

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