Organic Meadow Coop seeks financial protection

Tuesday, April 7, 2015

by SUSAN MANN

Organic Meadow Co-operative Inc. says a recent change by Dairy Farmers of Ontario to require cash on delivery for milk shipped to it, coupled with a shortage of organic milk this winter, have pushed the dairy company to seek creditor protection.

Canada’s oldest organic farmer co-operative announced Monday it has filed for creditor protection so it can complete the restructuring of its operations. The co-operative has more than 100 family farm members across Ontario, including about 60 dairy farms. It accounts for more than 70 per cent of the supply of organic milk in Ontario and manufactures a complete line of organic dairy products, including milk, cream, butter, cheese and ice cream. The company also has farmers producing eggs, vegetables (made into frozen product) and grains. Its products are sold in retail stores across Canada.

“The filing comes as an unavoidable and necessary move due to the onerous business terms recently placed upon it by the province’s milk marketing board,” Organic Meadow’s April 6 press release said.

Interviewed Monday afternoon, Graham Lloyd, Dairy Farmers general counsel and communications director said “we do not accept that any terms required were onerous as we continue to supply them with milk.” He declined to discuss the terms. “We prefer to not treat our relationship in the public.”

When Organic Meadow filed its Notice of Intention to make a proposal under the Bankruptcy and Insolvency Act on April 2, the company owed Dairy Farmers more than $800,000 for milk deliveries made in March.

Dairy Farmers is an unsecured creditor, Lloyd added, noting the marketing board “will ensure that organic producers are paid in full for the milk that DFO delivered” to Organic Meadow.

Dairy Farmers has a bad debt protection fund it established that it can tap into “for these purposes,” he said. Dairy Farmers will continue working with Organic Meadow while it restructures “and has arranged to supply milk during the restructuring process.”

Ted Minten, a Watford-area organic dairy farmer and vice-chair of Organic Meadow’s board, said Dairy Farmers of Ontario “changed us from a regular credit policy” to cash on delivery as of April 1. Previously Organic Meadow was given 22 days to pay for its milk deliveries.

He couldn’t say why Dairy Farmers made the change in payment terms.

Minten said for farmers and customers it's business as usual during the restructuring process. Farmers’ milk continues to be picked up and Organic Meadow is continuing to manufacture its dairy products.

Organic Meadow is not headed for bankruptcy, Minten said. “The plan is to come out of it (restructuring) stronger than we were.”

Michelle Schmidt, Organic Meadow marketing manager, said the milk shortfall made it impossible for the company to “fully produce the products for our customers.”  The milk shortages “have put a tremendous amount of pressure on our business because we’re not able to produce products to sell to the public.”

Dairy Farmers' change to Organic Meadow’s payment terms “was the last piece that forced our hand to go down the path of creditor protection,” she said.

Schmidt declined to say how much Organic Meadow owes its creditors. Organic Meadow is a privately held company and “we make it a policy to not talk about what we owe to people or what other people owe us,” she said.

Schmidt said Organic Meadow was granted protection from creditors after it filed for protection April 2 under the Companies’ Creditors Arrangement Act. Along with the milk shortfall and the change in Organic Meadow’s payment terms by Dairy Farmers of Ontario, there was a combination “of many different factors that necessitated the need for us to officially initiate this formal business restructuring process.”

Obtaining the creditor protection “will allow us over the next 30 days to formalize a restructuring plan that will allow us to set ourselves up for our future plans,” she said.

MNP Ltd. was appointed trustee, “which will oversee the restructuring process,” she said.

Via email, DFO’s Lloyd said the marketing board has been working with Organic Meadow for a substantial period of time to assist it with growing its market.

Minten said Organic Meadow’s restructuring process began in the fall of 2014. Restructuring the company was necessary because Organic Meadow was “getting to a little bit of financial trouble but it wasn’t anything severe,” he explained. “We thought we would try and restructure the company to make it more profitable.”

In the April 6 release, Minten said the new business model was beginning to significantly improve Organic Meadow’s results and the company was in the process of bringing in a new investor group. During a telephone interview Monday afternoon, he said he couldn’t identify the new investor group. BF