Feed suppliers fear they are out millions of dollars after Saskatchewan’s largest pork producer applied for creditor protection.
Humboldt-based Big Sky Farms has experienced 22 consecutive months of negative margins, is losing $350,000 per week and must financially restructure, say documents filed in Saskatoon’s Court of Queen’s Bench.
But farmers who supply feed to the company said that won’t help them get paid.
Dennis Michaluk, of Sturgis, Sask., lives four kilometres from a Big Sky barn and delivered nearly 500 tonnes of barley just a week before the company applied for protection under the Companies’ Creditors Arrangement Act.
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Big Sky owes him and his brother more than $60,000, plus a cheque for 15 tonnes of feed peas they delivered in September. Other farmers received cheques, only to see them returned due to insufficient funds.
“I’m pretty upset about the whole affair,” Michaluk said from his combine Nov. 16.
He said the company must have known it was going to seek protection when it accepted deliveries. He suggested Big Sky was “acting fraudulently” in accepting grain it couldn’t pay for.
“You don’t enter creditor protection overnight,” Michaluk said.
Other farmers are owed similar amounts or more, and are unsecured creditors. Michaluk said they would be lucky to get pennies on the dollar.
Rob Carlson hauled nine Super B loads to the Big Sky operation at Rama and is out nearly $50,000.
“We heard rumblings (that the company was in trouble), but they were always late,” he said of Big Sky payments.
Some farmers hauled their entire production to Big Sky facilities and will be in great financial difficulty because of the court process, he added.
Big Sky buys about $30 million worth of feed wheat, barley and peas every year for its 20 barns.
About 75 percent of the grain comes from farmers in rural Saskatchewan and Manitoba.
“Big Sky generally pays for such grain purchases within 15 business days,” said an affidavit from Canute Tagseth, the company’s chief financial officer.
“However, due to the prolonged downturn in the market, these payables have recently ranged between 30 and 60 days.”
Tagseth acknowledged that if farmers aren’t paid, the relationship will be damaged.
Several factors combined to put Big Sky, one of the country’s largest hog operations, at risk, including the extended industry downturn, a high Canadian dollar and the H1N1 virus that sent pork prices plummeting.
President and chief executive officer Casey Smit said the company has a plan to address immediate restructuring and long-term viability.
He said there are signals that the hog industry will improve.
“We can start seeing some prices get into breakeven by the late first quarter of 2010,” he said.
Normal operations will continue while the court process is underway. The company has already closed some operations, reduced its breeding herd by 18 percent, consolidated genetic lines, sold some assets and reduced administrative costs to keep costs in line.
Big Sky is also awaiting details of a federal assistance program for hog producers.
The Saskatchewan government has invested $29.6 million in Big Sky since the company’s inception in 1995.
Big Sky runs independently of government, despite the government’s 64 percent ownership stake.
Under the court order, the company must have a plan in place by the end of November. The matter is due back in court Dec. 9.
Company snapshot
Name: Big Sky Farms Inc.
President/CEO: Casey Smit, Humboldt, Sask.
Employees: 430 in 20 production facilities and 21 feed mills at 24 locations across Sask. & Man. Payroll is $13 million annually.
Financials: 10.7 million Class “A” common voting shares outstanding. Single largest holder is CIC Asset Mgmt. Inc. (Gov’t. of Sask.), which owns 6.725 million shares.
Total assets: $142.385 million as of Sept. 19/09.
Total debt: $107.178 million as of Oct. 19/09.
