Puratone deal leaves farmers hanging

Manitoba farmers owed at least $1 million for feed grains delivered to financially troubled Puratone Corp. are left holding an empty bag with its pending sale to Maple Leaf.

Earlier this month Maple Leaf Foods, which operates a hog-slaughtering plant in Brandon, announced it was buying Puratone for $42 million. Puratone’s liabilities total nearly $100 million, with $86 million owed to secured creditors such as the Bank of Montreal ($40.877 million), Farm Credit Canada ($40.28 million) and the Manitoba Agricultural Services Corporation ($5 million).

“It seems like it’s all in the hands of Maple Leaf right now,” Arborg farmer Kyle Foster, who is owed around $33,000, said in an interview last week.

He’s hoping Maple Leaf will pay farmers for the grain that was purchased to feed the hogs it will soon own as a goodwill gesture.

That’s not going to happen.

“Maple Leaf is purchasing the assets of Puratone, which does not represent liabilities held by the company,” Maple Leaf spokesman Dave Bauer said in an interview from Toronto Nov. 8. “The courts will supervise how those debts are settled so it’s best you follow up with Deloitte on that.”

Bauer agreed that if it did pay the farmers, who are unsecured creditors, other creditors would demand the same treatment. Revenues from Puratone’s sales are less than half of what’s owed to secured creditors.

An official from Deloitte, the firm hired to supervise Puratone while it is in creditor protection, did not return calls or emails.

Farmers have a better chance of getting paid when companies go broke. Under Section 81.2 of the Bankruptcy and Insolvency Act farmers go to the top of the creditors’ list to get paid for products they’ve delivered within 15 days of the firm going bankrupt. But that doesn’t apply in this case because Puratone sought credit protection, found a buyer and never declared bankruptcy.

“For the life of me I don’t understand how somebody can knowingly buy grain, not pay for it, put it in an animal, not have to give it back and sell the animal and not worry about having to pay for it,” Foster said.

“It’s kind of like borrowing money for a car and then selling it and not paying the creditor back. If I did that I would go to jail but if a corporation does that it’s OK; too bad for the farmer.”

It’s a terrible situation, said Doug Chorney, president of the Keystone Agricultural Producers (KAP). In just four days he said he heard from farmers in the Arborg area who said Puratone owed them between $25,000 to $70,000 each. He estimated the total outstanding to farmers he’s heard from to be near $1 million.

“Maple Leaf has taken over this company for pennies on the dollar and appears to have been absolved of any responsibility to the farmers,” he said.

Many farmers mistakenly believed they were protected by the Canadian Grain Commission’s (CGC) bonding system. It only applies to the 21 grains and oilseeds named under the Canada Grain Act and only when delivered to grain elevators licensed by the commission. (Even then farmers are only covered for 90 days after delivery or 30 days after getting a cheque. That’s why the CGC urges farmers to get paid at the time of delivery.) Feed mills aren’t licensed elevators, even though many take in as much grain as some elevators.

“Clearly the (CGC) current bonding system doesn’t work for everybody,” Chorney told KAP’s General Council meeting in Portage la Prairie Oct. 25. “We need to do something more that’s protecting more producers in a more comprehensive way.”

The federal government is proposing an insurance program replace bonding. Chorney says expanding protection to feed mills should be studied before a new system is implemented.

Farmers aren’t the only ones Puratone owes money. Many grain companies are owed hundreds of thousands of dollars.

Commodity Specialist Company is out more than $480,000, according to the list of Puratone creditors. Bunge is owed $244,000, ADM is out almost $183,000, Delmar Commodities is owed $25,000 and Parrish & Heimbecker, $23,000.

One individual is owed $2.2 million. Many other individuals and farm corporations are on the creditors’ list, along with local co-ops and truckers. Even Manitoba Hydro is on the list. It’s owed more than $122,000.

About the author

Reporter

Allan Dawson

Allan Dawson is a reporter with the Manitoba Co-operator based near Miami, Man. Covering agriculture since 1980, Dawson has spent most of his career with the Co-operator except for several years with Farmers’ Independent Weekly and before that a Morden-Winkler area radio station.

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