The management of the family-owned company has begun a consultation with the 380 staff at the Coleraine site over the future of the plant after concluding that the business did not have a viable future.
A spokesman for Farm Fed said: “The family took a long hard look at the business and the decision was reached that they couldn’t see a future in it.
“Costs have been escalating, in particular oil and animal feed. Against that, the price of chicken in supermarkets is going down.”
He said that the volumes lost when a contract to supply Sainsbury was cut back a year ago had equated to 20% of company turnover at the time.
But he added: “There are a number of other factors that contributed. Sainsbury was one part of a whole picture.
“There are people who can import fillets of chicken from outside Northern Ireland, such as from Argentina, and package and sell them for less than Farm Fed can produce them.”
Campbell Tweed, president of the Ulster Farmers’ Union, said the failure of Farm Fed was “another example of the serious detrimental effect that retailers are imposing on the other parts of the supply chain”.
He added: “This is an all-too-familiar occurrence.”
Farm Fed processes 15 million chickens a year, with annual sales of £20-25m.