Poultry Plant Shuts Down After USDA Aid

OMAHA (DTN) -- USDA's Agricultural Marketing Service is collecting claim information from as many as 50 poultry growers who have not been paid under growing contracts with Pure Prairie Poultry.

Less than two years after being awarded $45.6 million in USDA loans and grants, a northern Iowa chicken processing plant has shut down with state departments of agriculture in Iowa and Minnesota now working with farmers to feed or euthanize 1.6 million broiler chickens.

USDA officials issued a statement to DTN late Thursday on the situation. "USDA has been made aware of an emerging situation involving a number of growers in Iowa, Minnesota, and Wisconsin under contract with Pure Prairie Poultry and is actively looking into this matter."

As many as 50 poultry farmers across at least three states also could lose income from contracts as well as ownership stakes with Pure Prairie Poultry.

USDA is collecting claims information to assist in determining if there are valid trust claims under the Packers and Stockyards Act. USDA also is working with both Pure Prairie Poultry and the lender in a $38.7 million USDA-guaranteed loan that was granted to the company in early 2023. The department is also assessing the next steps in the company's $6.9 million Meat and Poultry Processing Expansion Program grant.

USDA's meat competition loan guarantees and grants were issued to 200 independent meat and poultry processing facilities over a two-year period.

Pure Prairie Poultry is the first of those projects that is reported to have failed. USDA stated to DTN, "this situation does not change the underlying need to expand local, independent meat processing capacity, which is important for farmers, consumers, and entrepreneurs alike."

Pure Prairie Poultry, based in Fairfax, Minnesota, was one of the first recipients of funds under the Biden administration initiative to help boost competition in the meatpacking and poultry industries. In November 2022, the company received a $38.7 million loan and a $6.9 million grant. The money was used to reopen a previously closed broiler chicken processing facility in Charles City, Iowa, that is considered a near state-of-the-art facility.

The company began processing chickens in Charles City and sold products to grocery stores regionally in Minnesota, Iowa, Missouri, Nebraska, South Dakota and North Dakota.

Pure Prairie filed for Chapter 11 Bankruptcy in Minnesota on Sept. 20. The company reported more than 900 creditors with liabilities between $100 million and $500 million while holding $50 million to $100 million in assets.

The bankruptcy filing led to a flood of objections the week of Sept. 23 from multiple large creditors. The banks that objected to the bankruptcy hold substantial loans, such as a $35.3 million construction loan and a separate $8.4 million loan for equipment.

Pure Prairie's lawyers filed that the company had sought approval for $15 million in financing to keep the company operating uninterrupted. A court filing on Sept. 25 by Pure Prairie also stated the company was looking at $10.8 million in negative cash flow over the next six weeks. Based on talks with the banks, Pure Prairie's lawyers asked for the federal bankruptcy judge to dismiss the case.

Pure Prairie noted that without financial relief the company would be forced to destroy as many as 2 million chickens.

Here are the situations by state:

IOWA

The Iowa Department of Agriculture and Land Stewardship (IDAL) announced Oct. 2 that the state was granted an emergency court order to take immediate care, custody and control of approximately 1.3 million broiler chickens on 14 Iowa farmers. Pure Poultry had notified IDAL on Sept. 30 that the company couldn't buy feed for those chickens. IDAL officials said they consulted with state and federal agencies, as well as others in the poultry industry, to look for a possible solution. "With no immediately available solution and citing significant potential animal welfare concerns," IDAL officials got an emergency court order to take custody and control of the chickens. IDAL is now coordinating with farmers to feed the chickens. Iowa officials are looking for financial reimbursement, "including through possible legal remedies."

It's unclear just how long before the broilers would be ready for processing or exactly what company would be capable of processing the chickens and marketing them.

At least 80 people in Charles City, Iowa, also lost their jobs when the processing plant was shut down last week.

MINNESOTA

The Minnesota Department of Agriculture reported there are five farms in the state with approximately 300,000 chickens.

Minnesota also fed the chickens but with no facility to process the birds, the department moved to euthanize the flocks.

"It is unfortunate that many of the Minnesota chickens owned by Pure Prairie Poultry, Inc. were not able to enter the food supply as intended. Since the company announced they were closing its Iowa-based processing plant last week and would be unable to process the chickens, the Minnesota Department of Agriculture (MDA), along with state and federal partners, worked to ensure the chickens were fed and we sought a processing solution for the animals. The MDA, farmers, and partners were able to process some birds, and that work continues. While the chickens do not pose a health or safety risk, the MDA will be utilizing emergency resources to ensure the remaining chickens are humanely depopulated according to American Veterinary Medication Association standards and overseen by experts from the Minnesota Board of Animal Health."

At least one farmer in Pierz, Minnesota, on Facebook was offering people 39,000 free chickens for anyone who would come to pick them up.

WISCONSIN

It's unclear how many farmers in Wisconsin are affected. DTN reached out to the Wisconsin Department of Agriculture about the situation but did not receive a response.

KAAL-TV in Rochester, Minnesota, reported a Wisconsin farm family with 62,000 chickens owned by Pure Prairie Poultry was faced with watching the chickens die. The couple told the TV station that Pure Prairie Poultry also owes them nearly $100,000 in missed payments. The chickens had gone for days without food.

People for the Ethical Treatment of Animals (PETA) issued a statement calling on Wisconsin officials to respond to repeated requests to intervene, noting reports that thousands of birds have been left inside poultry houses to die.

USDA FUNDS AND FINANCES

In a court affidavit, George Piechel, CFO for Pure Prairie Poultry, stated the $6.9 million grant from USDA helped provide gap financing for the company when it was generating little revenue in early 2023. The $38.7 million loan "was delayed substantially, thereby exacerbating the company's economic stress." Appraisals of the plant had to be done multiple times which then required the entire loan to be re-underwritten, Piechel stated.

From November 2023 until the end of September this year, Pure Prairie Poultry had approximately $38 million in operating losses. Liquidity issues forced shareholders to extend loans to the company.

USDA did not respond to questions from DTN over whether Pure Prairie Poultry received the loan and grant awards or whether USDA would have a way to recoup the taxpayer funds awarded to Pure Prairie Poultry.

Chris Clayton can be reached at Chris.Clayton@dtn.com

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