Farmland Industries has said that its pork plants are operating normally on the first working day after the largest US farm co-operative filed for Chapter 11 bankruptcy protection.
The US Agriculture Department, concerned the bankruptcy filing could hurt farmers, said in a statement it was working closely with the company to ensure that thousands of farmers who sell hogs to Farmland are paid.
Farmland is the US's sixth largest pork producer and the company said its three plants were operating normally at the start of this week and that producers continued to deliver hogs.
"Today we had full hog yards in all three plants, and no cancellations," Jerry Leeper, Farmland vice president of livestock production, said in a statement.
The pork plants - in Crete, Nebraska; Denison, Iowa; and Monmouth, Illinois - have a combined daily slaughter capacity of about 25,500 head, or about 7 per cent of daily US hog slaughter, according to industry sources.
"We will have auditing teams from USDA's Grain Inspection, Packers and Stockyard Administration on site at Farmland's three packing plants as well as at corporate headquarters in Kansas City," USDA secretary Ann Veneman said on Monday.
Auditors will review Farmland's payment practices and the assets available to pay producers. But the USDA has received no producer complaints regarding Farmland's payment practices, the department added.
Farmland, which missed a $10 million payment last week on a $500 million credit facility, said that day it had secured debtor-in-possession financing from a banking group led by Deutsche Bank to help it restructure.
But it did not reveal the size of that financing. In its Chapter 11 filing, Farmland said it had sought financing of up to $430 million.
Smithfield Foods, the largest pork producer in the US, last week pushed hard to buy Farmland's meat operations. Farmland rejected the offers but said it would still negotiate with Smithfield.
Farmland also owns about 70 per cent of Farmland National Beef, the fourth largest beef packer which has two cattle slaughter plants. The remaining interest is held by US Premium Beef, which has said it has the right of first refusal to buy Farmland's beef operations.
The beef and pork operations make up the bulk of Farmland's refrigerated foods division, which has annual sales of about $4.75 billion. The division includes a small catfish farming operation. Farmland said earnings in the division during the first half of 2002 doubled the prior year period.