Allen's Family Foods, Inc., of Seaford, Del., and its business affiliates have been in contraction for years. But on June 9, the 91-year-old poultry integrator filed Chapter 11 (reorganization) bankruptcy, setting in motion 60 days of business restructuring and industry changes.
The "kill" came when corn shot from $3.50 to $8.50, says CEO and President Robert Turley. With poultry feed being it's highest input cost, the company couldn't handle it. He blames ethanol. Mid-Atlantic Farm Credit sources confirm that corn prices had much to do with it.
Farm Credit, according to court records, holds $22 million of Allen's $82 million in secured debt. But the bankruptcy was triggered by Wilmington Trust's default notice and demanded payment on more than $520,000 in loans in late May. "We got all tangled up in that because Wilmington Trust ... got a little nervous," explained Turley.
The company has 28 grow-out farms plus contracts with 271 producers between the Delmarva and North Carolina. Its 2,273 employees pack about 8-million pounds of poultry a week.
Poultry industry insiders knew it was coming, and made preparations to ease the economic blow. As reported, Mountaire Farms of Delaware, Inc., and its new Seaford Milling Company affiliate announced an asset purchase agreement to acquire all Allen company assets. That'll require approval of the U.S. Bankruptcy Court in Wilmington.
Status of the grower contracts has not yet been determined. But Mountaire officials have indicated they'll be expanding production at two Delaware facilities to another 400,000 birds per week.
State help expected
Maryland's O'Malley administration is marshalling resources to help protect the growers and employees impacted, according to the governor's office. Maryland Department of Agriculture, for instance, is looking into USDA programs that could benefit producers, including the Poultry Loss Contract Grant Assistance Program.
PGAP has provided up to $60 million in assistance to poultry growers whose contracts were terminated because of the bankruptcy of a poultry company. Maryland's poultry industry is the state's leading agricultural sector, accounting for $640 million (40%) of farm income.
An auction is scheduled at the end of this month to sell remaining Allen Family Foods' assets. The new ownership will determine the fate of the Cordova, Md., plant.