Sun setting on Future Beef Operations
After months of uncertainty, the high profile Future Beef Operations (FBO) facility in Arkansas City, Kansas, is now widely expected to be liquidated. Opened as recently as August 1 2001, FBO had been designed as a vertically integrated business from cattle through the entire meat and by-product chain, including leather. (For previous stories use leatherbiz.com news search facility, ref: FBO).
The final chapter in the brief history of the plant appears to have been written when its trustees filed with the US Bankruptcy Court in Denver to start liquidation proceedings. The company had previously filed for Chapter 11 bankruptcy protection, as a number of contractors pursued it for unpaid debts.
Court records indicate that FBO lost $53.5 million in 2001 and another $11.3 million in the three months between March and June this year. It now has until August 15 to consent to or oppose the liquidation motion. The final nail in the coffin came last month when the plant’s main customer, the US supermarket chain Safeway, refused to pay seven cents more per pound for the company’s meat products.
From an early stage it was recognised that the cost of buying and raising the quality cattle required to fulfil the plant’s role as a specialist processing centre - producing carcasses to exact weights and specifications - was far in excess of what had been envisaged. In March, Safeway had agreed to help finance the additional expense. But several strings were attached – the main one being that the company should not sell to any of Safeway's competitors.
The extent of the plant’s problems was underlined in a report filed with the court by a firm of New York City business consultants. Following a four-week study, this found there was little prospect of the plant breaking in the short term. At the same time, it concluded that without the level of further investment the plant needed to become viable, there was little point in carrying on.
According to local press reports, serious problems were also encountered with the plant's new dehairing process which was designed to eliminate E-coli contamination on the hides. Aside from suffering poor reliability, this increased the cost of production by $3 per head, but in any case the process was under-utilised because the operation failed to sell sufficient hides. Speaking to the local press, vice president of Future Beef’s cattle operations, Ronnie Green, estimated the company spent $115 million to upgrade the Kansas processing plant, a plant he said is now worth around $25 million to $40 million.
