March 20, 2009
A sudden surge of spring-like warmth put a hint of green in my backyard just in time for St. Patrick’s Day. Whether the lovely weather lasts or if it’s just the luck of the Irish matters little because, clearly, winter is doomed.
So, too, seem the hog-growing farmers of Meadowbrook Farms, the Rantoul, IL pork packing cooperative highlighted here recently. Immediately after the U.S. Department of Agriculture’s Packers and Stockyards Administration (P&S) tardily entered the money-losing picture Feb. 9, Meadowbrook threatened to go for the long swim, a lender-protecting, member-clobbering Chapter 7 bankruptcy.
As straightforward as that path appears, nothing is straight or forward with Meadowbrook. From its 2004 start-up to its Feb. 2009 shut-down, its management routinely claimed profitability but never paid patronage and never allowed members a peek at the books to find out why.
Likewise, despite its announced plan to liquidate, Meadowbrook, as of March 18, has yet to file for bankruptcy.
Meadowbrook’s board did leak a memo March 5 that shifted blame for the coop’s demise from management to members. The packer failed because “…members and former members…” contacted lenders, USDA and other “US Senators and Representatives” to urge them that “MFC (Meadowbrook) should fail.”
What, the board had no role in Meadowbrook’s demise?
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More accurate is the coop’s failure to pay members an estimated $5.4 million for hogs slaughtered from mid-December through early February. When P&S got wind of non-payment, it boosted Meadowbrook’s operating bond from $740,000 to $5.9 million. Since the coop had neither the cash nor the ability to borrow to meet the bond, the P&S requirement effectively closed Meadowbrook.
But that thread of facts escaped the board. In its Pontius Pilate memo, the board invokes Abraham Lincoln’s famous 1858 House Divided speech to blame disloyal members for Meadowbrook’s failure rather than years of its own disastrous decisions.
“What could have been achieved,” the memo ends in a silly non sequitur, “if we had remained A House United?”
Well, if the past is any guide, Meadowbrook would have continued to rack up enormous losses, continued to see its start-up membership of over 200 fall to under its current 100, and continued to blame its failure on sour markets, sour clients and sour members – in short, anything and anyone other than management.
The good news, however, is that Meadowbrook’s one-time share price of $900 could not have fallen any farther. Today, shares carry no value and the board, to whom departing members had to assign their shares, now owns the majority of the coop.
That requirement puts the coop’s directors and managers in a unique position to end up with the state-of-the-art, $28 million pork plant should Meadowbrook leap into Chapter 7 or attempt a creditor work-out.
The farmer grapevine, notes one Illinois Meadowbrook member who lost serious six-figure money betting on the coop, has Meadowbrook’s board quietly negotiating with lenders to purchase the plant for $10 million to hook it to Triumph Foods, the producer-owned pork packer in St. Joseph, MO.
There’s some logic to the rumor. Last October, Triumph shelved plans to double its 19,000-head-per-day slaughtering operations with a second facility near East Moline, IL. Meadowbrook’s idled Rantoul plant, about 150 miles southeast of East Moline, might offer Triumph a cheaper, smaller, interim alternative.
If so, I will be proven wrong. Years ago when Meadowbrook was still on the drawing board, I urged prospective members to build it state-of-the-art so that when it went broke it would be worth 25-cents on the dollar rather than a dime.
If the Triumph deal materializes – and no one knows – the best guess is the Rantoul plant could bring 35-cents on the dollar, not 25-cents.
© 2009 ag comm
Write to Alan Guebert at agcomm, 21673 Lago Dr., Delavan, IL 61734, or by email at email@example.com