Chicken farmers press to get Siler City processing plant back in play

Siler City area chicken growers hope court will take action

mquillin@newsobserver.comSeptember 28, 2012 

— A group of poultry growers desperate to get back to work is trying to force the sale of the shuttered Townsend processing plant to a new owner who could get it running again.

“It seems like the only hope the farmers have,” said Sonya Holmes, who with her husband raised birds for Townsend on a farm outside Broadway until the plant shut down a year ago.

Townsend Inc. went bankrupt in 2010 as rising fuel and feed prices and declining chicken prices made it difficult to turn a profit. A company owned by a billionaire Ukrainian egg processor acquired Townsend’s Siler City, Pittsboro and Mocksville operations in February 2011 in a $24.9 million deal approved by a bankruptcy court. The company, Omtron, spent $7 million on upgrades to the Siler City plant and signed new three-year contracts with about 170 poultry producers before abruptly announcing five months later that the plants would close.

Along with the farmers, about 1,200 plant employees were put out of work.

While some of the plant workers qualified for unemployment compensation and job retraining, the farmers, who aren’t covered by unemployment, were left on their own, most of them hundreds of thousands of dollars in debt.

To grow chickens, farmers contract with processing companies that dictate nearly every detail of an operation, but it is the farmers who build and upgrade the chicken houses and buy the machinery to maintain them. The Townsend growers are $350,000 in debt on average, according to Benny Bunting, a former farmer who now works for the Rural Advancement Foundation International-USA, an advocacy group in Pittsboro.

All but about 30 of the growers have filed breach-of-contract lawsuits against Omtron, owned by Ukrainian businessman Oleg Bakhmatyuk.

While they need the money they would have been paid over the past year, what farmers say they want most is to “get back in birds.” But they can’t raise chickens without a contract. At the moment, some poultry processors in the state are reducing the number and size of the flocks allotted to growers because of losses from record feed prices. And growers generally can’t get contracts with processors more than 50 miles away because of delivery costs for feed and birds.

Omtron uninterested

Meanwhile, it appears that Omtron USA, a shell company based in Delaware, is interested neither in restarting the Siler City processing plant nor selling it, which frustrates state and local economic development officials who have talked with several other companies that have said they’d like to buy it and reopen it. Some have made offers to Omtron, only to have the company eventually cease communicating with them.

A Raleigh attorney representing Omtron did not return phone calls.

“It’s an unusual situation,” said Kim Decker, a marketing specialist with the N.C. Department of Agriculture and Consumer Services, which filed an affidavit in support of the growers’ effort to have the plant taken over by a receiver. “I’ve never seen anything like it.”

Putting the plant into the hands of a receiver could achieve two of the farmers’ goals. A court-appointed receiver could determine a value for the plant, negotiate with buyers and potentially sell the property, meaning it could be put back to use. Funds from the sale would go into an escrow account, and if a court finds in favor of the farmers on their breach-of-contract suits, the money could be used to pay claims. Omtron would get any proceeds left over.

This week, Chapel Hill lawyer Lynne Holtkamp, representing about 120 growers, asked the court for a hearing into whether a receiver should be appointed to handle Omtron’s assets. Even if a judge appoints a receiver, it could take a year or more to sell the plant and get it running again, Holtkamp says.

‘We have to make a decision’

LouAnn Dowd and her husband, Charles, don’t have that kind of time.

“We have to make a decision,” LouAnn said this week after an auctioneer made a second trip to size up the family’s home, five chicken houses, farm equipment and their 76 acres in the Bear Creek community of Chatham County.

Like most poultry growers, the couple allowed their home to be used as collateral when they borrowed money or refinanced loans for the farm. After Townsend closed, they were relieved to get a contract for three flocks from Mountaire Farms in Robeson County, but the flocks are fewer than half the 70,000 birds they normally tend at a time. That’s less than half the income, nearly the same amount of work and the same long hours: up early to check on the birds, and looking in on them every hour or two to make sure the houses are not too hot or too cold, feed and water are flowing and nothing goes wrong during the seven to nine weeks the chickens are in their care.

All to earn 35 to 50 cents per bird.

LouAnn is bringing in a little extra cash selling aprons she sews on a portable machine on her kitchen table. The family has traded in their newer-model cars for older ones. The couple’s youngest son has put off going to community college to save money. Charles has sold some of the equipment he thinks he can do without, along with some beef cattle, and he works hay part time.

So far, the bank has not called the family’s loan, LouAnn says, “But they probably have a right to. They can’t wait forever.”

Bunting, of the Rural Advancement Foundation International-USA, has helped some of the troubled farmers renegotiate their debts. He fears that more than half the Townsend growers eventually will lose their farms, if not their homes.

“They’re slowly drowning,” he said.

Banks have tried to hold off on foreclosures, because the warehouse-sized chicken houses – which can cost up to a half-million dollars to build – have few other uses, and the lenders hope market conditions will improve so the farmers can get back to work.

Though producers have been cutting back in North Carolina, the nation’s second-largest poultry-producing state, the contraction is expected to last only until feed costs drop, meat prices rise, or both. Sanderson Farms opened a new chicken plant last year in Kinston that can process 1.25 million birds a week, and it is working now with Nash County officials to try to open a new plant there.

Three tough choices

LouAnn says unless her family can get more chickens to raise or find non-farm work that pays enough to cover their loans, they have three choices: declare bankruptcy, let the bank foreclose or auction the property and hope they reap enough to pay off what they owe.

“I am a Christian person with strong moral values,” she said. “I pay what I owe.”

It pains the couple to think of losing this land. Three generations of Charles’ family have farmed this rural area of Chatham County an hour southwest of Raleigh, and pioneered the county’s poultry industry in the 1950s.

Charles’ mother told LouAnn that when Charles was a schoolboy, he would stare out the window when he was supposed to be listening in class.

“He’s dreaming about flying, or airplanes,” the teacher complained.

“He’s dreaming about farming,” his mother said.

The auctioneer left a contract in hopes the couple will schedule a sale for this fall, before the bank starts foreclosure proceedings.

They haven’t signed it yet.

Quillin: 919-829-8989

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