An unnamed third party has presented to a Regina court a draft business plan designed to re-open Moose Jaw’s Worldwide Pork.
The person or company could also invest in and manage the plant, said the lawyer representing the packer.
Rick Van Beselaere told reporters July 18 that the name of the third party cannot be released.
“It’s not that we’re keeping it from people. They’re just legally required not to disclose it at this point.”
He said the party has hog management experience, but would not confirm if it is Saskatchewan-based.
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Van Beselaere was speaking outside the Regina courthouse after a judge granted Worldwide another 16 days of court protection under the Companies’ Creditors Arrangement Act.
Justice Dennis Ball extended the order to Aug. 3 even though he had concerns.
“I have significant doubts that a restructuring can be successfully put in place,” he said.
The plant has been closed since mid-May after producers quit delivering hogs because they hadn’t been paid.
A group including several Hutterite colonies and SPI Marketing Group is trying to force Worldwide into bankruptcy. The group’s lawyer argued against extending the order.
“Based on what they’ve seen so far they don’t think that the plan is at all realistic,” said Paul Harasen. “It calls for the investing of a significant amount of money and a significant loan, plus the question of where are they going to get the hogs from.”
Van Beselaere said the plan would require about $9 million – $5 million to expand and double production to 500,000 head per year, create 40 jobs and allow for fresh chill product production and $4 million to satisfy creditors. He said the new management company might put some money in, but he expected funds to come from government investment, lenders and the recently announced 15 percent provincial investment rebate program.
“A lot of people have said that this company is too small to be financially viable in today’s marketplace,” said Van Beselaere. “One of the big things that the business plan does is that it deals with that problem. It gets it bigger. It gets it handling more hogs and putting them through without a whole lot of incremental costs.”
He said the plan would take the company from losing $7 per hog handled to saving $25 per hog.
It also sets out a proposal to repay the producers Harasen represents.
They would get $2 million in cash, about half of what they’re owed, 25 percent of what they’re owed in shackle space, and 25 percent of preferred shares in the restructured company.
Harasen said his clients have taken their hogs elsewhere so shackle space isn’t of value. He said they don’t expect to get the $2 million because they don’t expect the plan to work.
They want the bankruptcy petition to be heard and granted or a more realistic proposal.
“They also want to find out what happened,” said Harasen. “They want to know how it is that they supplied all of these hogs and didn’t get paid. From what we’ve seen, it looks like some of the liabilities the directors may have had personally were getting paid.”
The lawyer representing the plant’s 270 unionized workers, who are currently laid off, supported an extension of court protection.
The lawyer representing the secured lender, Agricultural Credit Corp. of Saskatchewan, said no decision had been made about giving more money to Worldwide Pork. He said ACS needs more details about who the third party is and the business plan itself.
Soybean’s price rally, ignited by spreading dry conditions in the U.S. Midwest, has generated less heat in canola markets.
The reason is that it appears the canola supply will outstrip demand in 2005-06 leading to increased year-end stocks whereas U.S. soybean supply will be less than demand, causing a drawdown in ending stocks.
From June 30 to July 18, Chicago November soybeans rose to $7.28 US per bushel from $6.66 an increase of nine percent, while Winnipeg November canola has risen to $302.90 Cdn per tonne from 285.80 on June 30, a change of six percent.
Soybean prices jumped higher when the hoped for rain from the tail end of Hurricane Dennis did not materialize and the condition of the soybean crop, particularly in the key producing state of Illinois, deteriorated.
Meanwhile, canola crops in Saskatchewan and Alberta look good, maybe even record, offsetting the drowned out crops of Manitoba.
Agriculture Canada’s June 28 Grains and Oilseeds report puts 2005-06 canola production at 7.5 million tonnes and traders are a bit more optimistic, forecasting a 7.5-8 million tonne crop. Last year’s crop was 7.73 million.
Agriculture Canada forecasts 2005-06 ending stocks will climb to 2.1 million tonnes, up from 1.725 million.
The U.S. Department of Agriculture has forecast U.S. soy production at 78.65 million tonnes, down from last year’s record 85.48 million. It sees 2005-06 ending stocks falling to 5.71 million tonnes, from 7.89 million in 2004-05.
Canola is also likely to see strong competition internationally. Europe’s canola production is expected to be slightly smaller than last year’s bumper crop, but bigger than average.
Australia’s crop was threatened early in the year by drought but June rain rescued it. It is now forecast at 1.31 million tonnes, down only a little from last year’s 1.53 million tonnes.
The American crop, grown mostly in North Dakota, also looks good. Area increased to 1.09 million acres, up from 865,000 last year.
Another factor working against canola is the relative strength of the Canadian dollar, which seems to be settling in at a couple of cents stronger than it was earlier this year.
The lesson to be learned from all of this is that barring another August frost, there is nothing in the canola picture to drive its price higher. So this soybean rally, which has dragged canola a little higher, might present a pricing opportunity.
