Investors who once saw their dreams of a Saskatchewan potato-processing industry sink in red ink are prepared to try again.
They’re beginning by buying back the fresh pack plant with which they started.
All but one of the investors who recently reached a $7.9-million out-of-court settlement with the province after the 1999 bankruptcy of Lake Diefenbaker Potato Corp. have bought the assets of Agristar Produce (Sask.) Ltd. at Lucky Lake, Sask., which was in receivership.
Mark Langefeld, who speaks for the investor group, could not confirm the purchase price. The deal was expected to close later this month.
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“Right now they’re going through the process of formalizing the vesting order,” he said in an interview from Whitefish, Montana.
The facilities include 600,000 hundred-weight of refrigerated storage and a fresh pack plant, where potatoes are washed, graded, packed and distributed.
Langefeld said this begins a renewed effort in the region, this time without government involvement.
“We’re doing exactly what LDPC was going to do,” he said.
“The government screwed that up so royally. The actual business plan was never launched.”
LDPC was a group of investors and growers who worked with the government as part of its Spudco initiative. The government wanted to use the irrigation area around Lake Diefenbaker to establish a potato industry that would eventually include a french fry plant, and it needed to increase production to do that.
It formed Spudco in 1996, and worked with growers and companies including LDPC to expand potato acreage.
In 1997, the Saskatchewan government began con-struction of what would eventually be seven state-of-the-art, climate-controlled sheds to store the resulting crop, fully funding the nearly $23 million cost even though it said it had a private partner.
But not long after, potato prices dropped. LDPC went bankrupt in May 1999, losing $35 million. The govern-ment estimated its losses at $34.4 million, including the cost of settling the sub-sequent lawsuit.
Harry Meyers, who operates Barrich Farms in Outlook, Sask., and who has grown seed potatoes for more than 20 years, said the government ignored the fact that the provincial table potato industry was mature.
As acreage increased, prices dropped.
“We saw things happening in the marketplace that we had never seen before,” he said.
Even a few thousand acres make a difference in a mature industry, Meyers said.
Acreage rocketed from 6,900 acres in 1996 to 13,500 in 1998.
It dropped to 8,000 in 1999 and has since recovered to about 12,000 acres.
Meyers said many current growers were never involved in the government’s project.
“Those who tried to do it on their own, those people are still here,” he said.
“I can’t honestly say that everybody’s flourishing.”
Frank Gatto heads Agristar Produce, the Alberta company that was known as Pak-Wel when it bought the fresh pack plant after LDPC’s bankruptcy.
He said Agristar’s losses in Saskatchewan will exceed $2 million, yet he believes a successful industry can be developed. Agristar’s troubles stem from a variety of sources, including, said Langefeld, local growers’ unwillingness to support the company.
Langefeld doesn’t expect he’ll have the same problem. He and new investors he describes as a “consortium of oil men” have plans to invest an additional $16 million to buy or build two more storage sheds and build a dehydration plant.
They plan to grow 4,000 acres of their own potatoes, including certified seed for table varieties.
Meyers said some growers are concerned about the disease risk if table or processing potatoes are grown or brought into a seed-growing area. Langefeld said he has already approached rural municipalities asking for strict shipping protocols to keep the area disease-free.
Lucky Lake farmer Bob Tullis, who was involved in the lawsuit, said producers are more cautious this time around, yet they see the merit in adding value to potatoes.
“We do have the opportunity to reinvest but money is in short supply around here,” he said.
“We had hogs go down, we’re on the second round of potatoes and Pak-Wel went under, taking some locals with it.”
The government, meanwhile, has sold six of its sheds. Meyers owns one at Broderick and two Alberta growers bought another. Two local growers bought the Riverhurst shed and the Maritime-based Irving family bought the one at Tullis. The Lucky Lake sheds will soon belong to Langefeld’s group.
The seventh shed, at Broderick, is still owned by Sask. Valley Potato Corp., the successor to Spudco as the government moved to wind down its involvement.
President Glenn Hornick said the shed’s capacity is leased to five growers and he expects it will be sold within the first quarter of this year.
