by SUSAN MANN
Organic Meadow Co-operative Inc. and its two related companies owe more than $20 million to a wide variety of creditors including one company that’s a competitor to the co-op’s dairy business.
On April 2, Organic Meadow Co-operative, Organic Meadow Inc. and Organic Meadow Ltd. obtained protection from creditors after each filing a notice of intention to make a proposal under the Bankruptcy and Insolvency Act so they could restructure their operations. MNP Ltd. has been appointed trustee.
Don Rees, CEO of Organic Meadow Co-operative, says there are three companies within the organization – the co-op, Organic Meadow Inc., the company that owns the dairy processing plant in Guelph, and Organic Meadow Ltd., which operates the plant.
Rees has blamed some of Organic Meadow’s financial troubles on the Dairy Farmers of Ontario milk allocation system that saw the company short of organic milk this winter to make cultured products, such as yogurt. The milk shortage occurred despite Organic Meadow’s 60 dairy farm members providing more than 70 per cent of the organic milk supply in Ontario.
In Ontario, as in the rest of Canada, milk produced on farms is pooled and sold to processors by provincial dairy marketing organizations. In Ontario, Dairy Farmers of Ontario markets both conventional and organic raw milk to processors. The marketing board supplies milk on demand for processors making products such as milk for end consumers as well as yogurt and ice cream and distributes the rest of the milk supply for products such as cheese, butter and condensed milk to industrial plants using a quota allocation system.
Ted Minten, vice chair of the Organic Meadow board, also noted in an earlier interview that the company faced difficulty when Dairy Farmers of Ontario required it to pay cash on demand for milk supplies as of April 1 rather than the previous payment terms that gave the company 22 days to pay for milk.
The co-op has 100 family farm members and makes a range of dairy products along with its egg, grain and frozen vegetable business. The products are available at retail stores across Canada.
Organic Meadow is continuing to manufacture dairy products during the restructuring. Eggs and grains have always been an important part of the co-op, Rees says. “We are managing that as we go along here and we’re hoping to come out of the (restructuring) process much stronger and fully intact.”
On the dairy side, Rees says Organic Meadow is in a very competitive dairy market. “We compete with very large, mutli-national dairy companies and we’re holding our own in the marketplace but it has been difficult for a very long time.”
Organic Meadow created and carved out the organic dairy market but now it faces competition from giant dairy companies “that really are just recently entering into the organic space,” he says.
Through Organic Meadow’s financial restructuring, the company’s intention is to “do the very best we can through the process for everybody,” he says. “But number one is to protect the rights of the farmers.”
In a previous interview, Graham Lloyd, Dairy Farmers general counsel and communications director, denied the marketing board is responsible for the company’s financial difficulties. He also noted Dairy Farmers is continuing to supply the co-op with milk throughout the restructuring process.
On the Organic Meadow Ltd. list of creditors owed $250 or more is about $3 million owed to Organic Meadow Inc. and $1.4 million owed to the Royal Bank of Canada. The lists didn’t specify which creditors were secured or unsecured.
On the list for Organic Meadow Inc. are: $3.2 million that company owes to Farm Credit Canada, $9.3 million owed to Avrio Ventures Limited of Calgary, Alberta and $2.4 million owed to Organic Meadow co-op.
Rees says “there are secured creditors and there are unsecured creditors. We don’t really comment on that. We can’t really get into the details.” He also declined to discuss the specific amounts owed on the creditor lists.
Rees also declined to provide specifics on how the restructuring process was going saying in an email Organic Meadow was working to reach an agreement with all of its creditors. “It would be inappropriate for us to speculate on what the details might include.”
There is also a separate four-page list of 37 farmers, including several Amish farmers, who provided member loans to Organic Meadow totaling $760,543.93. The loans are for varying amounts ranging from $100,000 provided by Tony and Frances McQuail of Lucknow to $2,001 from Amish farmer Martin Clean of Mount Forest.
McQuail says he loaned the money to Organic Meadow about 1.5 to two years ago. “It’s a membership organization and when they were looking to do some financing they approached the members” and a number of members stepped up to the plate to provide loans.
McQuail says he has supported and been a member of Organic Meadow since its inception 25 years ago and calls it an organization that is a “remarkable incubator for innovative marketing in organic market development.” The co-op developed both the production and marketing side of the organic dairy industry.
He adds he’d rather invest his money in an ethical, co-operative organization like Organic Meadow than a mutual fund or other things. But he admits he’s anxious about the company’s current situation.
Asked if Organic Meadow can successfully come out of creditor protection, McQuail says “Oh yes. But we shouldn’t be denied at least enough of a percentage of our members’ milk to keep our plant working. It’s tragic that it had come to this. We have the market but we are being denied access to our own farmers’ milk.”
His organic farm produces freezer beef and pork that he sells directly to customers. The beef is certified organic but the pork isn’t because some of the suppliers aren’t certified organic. The McQuails also have a small certified organic apple orchard and certified organic hay and pasture fields.
In addition to being on the list of membership loans, McQuail is also on the Organic Meadow Ltd. list with $833.33 owing to him. He says that’s the current outstanding interest on his loan.
Among the creditors are Dairy Farmers of Ontario, which is owed $850,000. Lloyd previously explained that is for unpaid milk deliveries made in March. But Dairy Farmers is also on the member loans list for $88,984.44 for what’s called the DFO share purchase advance.
Lloyd says he has contacted the trustee to clarify what that amount represents. “We don’t know what that is. That document (listing the creditors and what they’re owed) is prepared by Organic Meadow.”
Dairy Farmers of Manitoba is also Organic Meadow Ltd. list with $13,639 owing to it.
Several dairy companies are on the Organic Meadow Ltd. creditor list including:
- Alliston Creamery Dairy of Alliston – $14,673.61.
- Cochrane’s Dairy Ltd. of Russell – $43,796.68.
- Elite Dairy Ltd. of Toronto - $224,435.32.
- Fromages La Chaudiere Inc. of Lac-Megantic, Quebec - $183,696.63.
- Kawartha Dairy Limited of Bobcaygeon – $11,275.87.
- Notre Dame Creamery Ltd. of Notre Dame De Lourde, Manitoba - $316.
- Saputo Dairy Products Canada of Montreal, Quebec - $129,267.83.
- Shaw’s Ice Cream of St. Thomas - $5,747.43.
Some other creditors and the amounts they’re owed include: the University of Guelph ($1,015.50), Union Gas Bankruptcy Department of Brantford ($6,679.21), The Co-Operators of Guelph ($14,044.89), future share redemption ($65,303.28), employee vacation pay ($108,000), the Canadian Food Inspection Agency ($1,695.82), the Canada Organic Trade Association ($2,550), the City of Guelph ($16,619.61) and 407 ETR Express Toll Route ($1,233.34). BF
Comments
Communism has been waggishly described as you milking the cow, the state taking the milk and then shooting you, or,wait, that may be fascism. Anarchy would be when someone steals the cow and shoots it too.
I can't imagine the frustration currently being felt by the dairy-farmer members of this co-op knowing that the milk they produce (70% of the total market) is being diverted by the DFO commissars to processors who are trying to (and apparently did) drive the co-op processing plant out of business.
Whether this structural imbalance is communism, fascism or anarchy, the point remains that it is just plain stupid for DFO to deny that DFO policies had anything to do with this company's demise when nobody is denying that the owners of the co-op produced way more than enough milk needed to have prevented this milk-supply constipation in the first place.
Or, to look at it in another way, any time a vested interest group denies responsibility, they're usually guilty as Hell, and then some.
Stephen Thompson, Clinton ON
The DFO. has pushed many dairy producers a processors out the milk industry. Stephen for once i agree with you.
Western farmers long-chafed under the monopoly power and pooling policies of the Canadian Wheat Board (CWB) in exactly the same way organic dairy farmers who produced enough milk to supply their own co-op (but weren't allowed to deliver it) are now chafing at the way the monopoly power and pooling policies of the Dairy Farmers of Ontario contributed to supply problems at, and resulting bankruptcy of, this particular dairy processing co-op.
Therefore, even though federal Ag Minister Gerry Ritz currently boasts about supporting supply management forever, he threw the CWB under the bus claiming he was giving western farmers the "freedom" to sell their wheat to whoever they wanted, and whenever they wanted - he could, should and hopefully will, throw DFO under the same bus on behalf of organic dairy farmers and Canadian consumers for exactly the same reason, and the sooner, the better.
Stephen Thompson, Clinton ON
They need to change the way they operate as many urban consumers are very up set with the way supply management handles the organic and small flocks
They never had a hope with the D.F.O. controlling their milk supply
They owe what seems to add up to about 16 million @ 8% interest that is over $1,000,000 a million dollars a year just in interest payments,
That is a big number to over come.
Local farmer
About a 200 cow operation with land yes they would have been better off investing in that instead of trying to be inavative fools
Nowhere in the article is an 8% interest figure, or any interest figure for that matter, even mentioned.
Furthermore, while "local farmer" is obsessed about interest rates which seem to exist only in his/her mind, he/she completely ignores the issue which goes to straight to the heart of the matter and which was succinctly expressed in the article by Mr. Mcquail:
"We are being denied access to our own farmers' milk"
Therefore, blaming management, the Board of Directors and the capital structure of the company for its demise overlooks an equal, if not greater culprit, the proverbial "last straw" in the ethics (and/or possible lack thereof) of DFO's denial of supply as quite-accurately noted by Mr. McQuail.
Stephen Thompson, Clinton ON
This scenario reminds me of the producer/owners of Conestoga and their dispute with the former Ontario Pork. That ended with the marketing powers of Ontario Pork being removed.
Their comes a point when the owner of the product...be it hogs, western grain or organic dairy products see the advantages of taking control of their own destiny and the disadvantages of dictatorial control.
It takes commitment, confidence, ability and hard work...but this is a democracy...isn't it?
D. Linton
Editor: Comment will be published if resubmitted and signed.
Stephen the question I would have is even if they had full access to their milk could they possibly sell enough milk at the margins required to be able to service the debt ? Their main rivals seems to be doing very well with their allocations Harmony and Organic Meadow would be a fair comparison both farmer owned
One very successful and one that has continually struggled year after year, but always seemed to find new investor money, to keep to operational.
I think you would agree that always needing a life line isn't healthy for a business that has been around for 25 plus years.
Sean McGivern
While:
(1) management ability,
(2) individual and/or collective limitations of the Board
(3) financial structure and/or cost/volume/profit limitations
are all issues in this and any business, they are, in this case, not THE issue at the heart of the matter because without an adequate amount of product to make the cost/volume/profit equation work, even a business with 100% equity is going to go under.
Margin and volume are two sides of the same coin - huge margins and low volumes (dairy farming under supply management) are the order of the day in some industries while low margins and high volumes (grocery store retailing) are the order of the day in others.
As Mr. Linton has already pointed out, it doesn't matter whether it was Conestoga Packers being strangled by Ontario Pork, western farmers being strangled by the Canadian Wheat Board or organic dairy farmers being strangled by DFO, the common culprit is the socialist mentality of "pooling" and single-desk selling which rewards mediocrity and simultaneously punishes initiative and consumers.
Stephen Thompson, Clinton ON
You just described the U.S. Agriculture and the U.S. Farm Bill.
Yep, U.S. Farm Bill induced Fence Row to Fence Row Farming lives on.
Some might also say balls to walls boys or until the last farmer cries uncle as we continue to overflood the world S. & D. market with ever increasing overproduction so that farmers can subsidize the rest of society.
Editor: Comment will be published if resubmitted and signed.
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