The failure of a durum co-operative in the United States isn’t going to deter a group of farmers from pursuing a similar venture north of the 49th parallel.
Shareholders of the Bushel 42 pasta plant in Crosby, North Dakota, have voted to dissolve their co-op one year after their processing plant ceased operations.
The facility, which was in existence for only a little more than a year, fell victim to slumping pasta sales and unforeseen operational difficulties.
Its demise hasn’t spooked a group of Canadian durum growers that has attempted to invest in a pasta operation for the past five years.
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Perry MacKenzie, chair of Prairie Pasta Producers, said stark contrasts between the two co-ops make it impossible to draw parallels.
“Those guys went with their heart and that’s something that Prairie Pasta hasn’t ever done,” he said.
The two groups began life as one international alliance of farmers looking to invest in a pasta venture.
They parted ways when the growers from Montana and North Dakota decided to create their own plant in Crosby to help revive the struggling community, while the Canadian growers went in a different direction.
MacKenzie said the Bushel 42 venture was well intentioned, but his group wanted to follow a feasibility study and business plan that told it to buy into an existing facility rather than start a new one.
“We tried to pursue an entry strategy that wouldn’t be a failure,” he said.
That strategy eventually led the group to conclude it should buy shares in Dakota Growers Pasta Co., North America’s third largest pasta producer, located in Carrington, N.D..
Those plans were derailed when the group discovered it did not qualify under the Canadian Wheat Board’s new generation co-operatives policy, which complicated the delivery of Canadian durum to the U.S. plant.
Prairie Pasta’s board of directors plans to meet in October to work out a new strategy for aligning itself with a pasta plant in a manner that pleases the wheat board.
MacKenzie said the co-op is still in discussions with Dakota Growers about the possibility of undertaking a Canadian expansion, although he recognized that is an unlikely scenario given the current economics of the pasta industry.
The 1980s and 1990s were a time of prosperity for pasta producers, but the industry flattened in 2000 and has been heading downhill ever since, best illustrated by the demise of New World Pasta, a leading maker of branded dry pasta in the U.S., which filed a Chapter 11 bankruptcy petition in May.
Dakota Growers has also experienced financial woes, reporting a net loss before income taxes of $500,000 in 2003, compared to a pre-tax profit of $9.2 million the year before. The company attributed its problems to a 3.7 percent decline in supermarket pasta sales in 2003 due to the popularity of low-carbohydrate diets.
The firm received a much-needed $5 million equity injection from MVC Capital in August that should improve its prospects.
Bushel 42, on the other hand, was unable to obtain the financial bailout it needed to keep afloat.
“Essentially we just ran out of money before we got everything squared around,” said Carl Dahl, vice-chair of the co-op.
The venture was the victim of poor timing, opening its doors right when low-carbohydrate diets came into vogue. It also had problems getting production up to speed, finding qualified help and dealing with customer mergers.
“All these things, combined together, took this place down before it had a chance to really get going,” said Dahl.
Members in the co-op lost an estimated $2.8 million of equity.
Dahl remains convinced there is an opportunity in the pasta business for a small firm that produces specialty items such as organic pasta and noodles with unique shapes, sizes and colours.
“It’s not something big companies want to mess with because of the amount of clean-down and everything like that.”
He said Prairie Pasta members shouldn’t be deterred by the Bushel 42 experience.
“The main thing is you have to go for it. If you think it’s viable, you have to go. We can’t as farmers sit back and let the world pass us by. We’ve got to take control of our own destiny.”
