Award winning beef program hits hard times

Tuesday, January 20, 2009

© Copyright AgMedia Inc

by BETTER FARMING STAFF

The directors of a beef marketing venture that owes producers $400,000 say they are “moving forward slowly” and have been able pay interest on debts to producers.

Launched in 2006, Kerr Farms Sales, which featured Angus beef raised without the use of hormones or antibiotics, seemed destined for success. The venture had four shareholders: Bob Kerr, a cattle producer based in Chatham, Amos Brielmann a cattle producer based in Rainy River, Eugene Miniota, a meat distributor, and Stefan Oellinger who is the business’ general manager. The group supplied frozen ground beef to Costco stores in Eastern Canada.

In April, 2007, Kerr received a regional Premier’s award for agri-food innovation for the venture that he initiated. In 2008, the company began supplying Sobeys markets.  By mid-year, the venture was running into problems.

“We were not sustainable,” says Oellinger, who along with Miniota, remains as a company director.

Kerr, who was its principal financer, removed himself in July, after directors realized they could not honour producer contracts that promised as much as $1.90 per pound for finished cattle.

“You can imagine how uncomfortable that is for me since I am a cattleman,” he says. Kerr says he left because of policy differences.

“Can you imagine my pain?” He says the company owes his own business, Kerr Farms Ltd., money for cattle “plus the investment we made in the business.”

Kerr says he “fervently” hopes the business can turn a corner. He wants to see “the farmers that haven’t been, paid.” 

Brielmann is also no longer a director but remains a shareholder.

Oellinger blames “overly optimistic” premiums and not being able to sell enough of the carcass at a price that could offset expenses. On accountants’ advice, directors decided to break the contracts and offer producers lower prices.

Producers complained to the government-run Ontario Beef Cattle Financial Protection Program, which told Kerr Farms Sales to make payments or lose its license to buy cattle. “I had no idea we were operating out of compliance, says Oellinger. They paid. “If our license is taken away then we’re finished.”

“I want this thing to succeed,” he says, pointing out that both he and Miniota have a lot invested in the venture.

Recently, a revised payment scale of 15-17 cents above rail prices and a broadened market base for different products have helped to steady the business, he says. The company had initially deferred payments to producers, which is not allowed under the financial protection program. It now pays producers within the time period specified by the program.

The company buys and processes about 40 cattle a week at auction and directly from producers, some of whom are still owed money. Oellinger says the future “looks good,” and hinges on the business being as transparent as possible. “We don’t want to put any other producers at risk.”

CLARIFICATION: During a Jan. 20 interview, Oellinger said his cattle buyer was attending a livestock sale in Brussels: "“Like today, for example, my cattle guy was out at a sale where qualified cattle from the herd of origin, raised without hormones or antibiotics, verified by the producer.” In a Feb. 6 communication to Better Farming, Mike Larsson, the company's cattle buyer, stated the company only buys finished cattle directly from producers and not at auction. On Feb. 9 Oellinger and Larsson said that Larsson attends livestock sales to meet farmers but does not buy at these events.

Oellinger has approached the province for funding. Sobeys remains a customer, along with restaurants and food services, mostly in the Toronto area. BF

UPDATE: 21 Jan., 2009
Ontario Agriculture Ministry spokesman Brent Ross says one claim was filed against Kerr Farm Sales under the beef cattle protection program several weeks ago and an investigation is underway. The results will be reported to the Livestock Financial Protection Board.

He affirms the company is a licensed livestock dealer, having obtained its license in April, 2008.

The program requires that sellers of beef cattle receive payment within two days of sale and deposit the cheque within five banking days of receiving it. Sellers can’t extend credit to the dealer. Application for a claim against  the fund must be made within 30 days of when the sale payment was due.

Ross says the board doesn’t approve compensation claims for sales transactions that fall outside of the program’s requirements. BF