Farmland Industries
Encyclopedia
Farmland Industries was the largest agricultural cooperative in North America when it declared bankruptcy in 2002.
The Farmland brand and its slogan "Good Food From the Heartland" is now owned by Smithfield Foods
. While owned by Smithfield Foods, Farmland Foods, Inc. operates independently and continues to market meat products under the Farmland brand.
It was founded 1929 by Howard A. Cowden as the Union Oil Company (as a successor to Cowden Oil Company which he founded the year before). In 1935 it took the name Consumers Cooperative Association (CCA), and in 1966 Farmland Industries, Inc.
At its peak, the organization was the largest agricultural cooperative in North America, owned by 1,700 farm cooperative
s in the United States, Canada and Mexico, which cooperatives were in turn owned by more than 600,000 farmer families. It had 16,000 employees in all 50 states and 90 countries. In 1977 it ranked #78 on the Fortune 100 company list. In 2001, its annual revenues were in excess of $11.8 billion. It was listed as one of Fortune's "most admired" companies. It ranked #170 on the Fortune List when it dissolved.
The cooperative provided both agricultural supply and marketing services ranging from petroleum refining, fertilizer manufacture, feeds, shipping, crop production, livestock production, and refrigerated foods sales and marketing. The company was a joint venture partner with a number of other companies, including: Archer Daniels Midland
in grain storage, distribution and marketing; Simplot
in phosphate production; ConAgra in wheat marketing; Land O'Lakes
in feed systems and crop nutrients; Cenex
Harvest States in lubricants, propane and refined fuels; Mississippi Chemical in nitrogen production and shipping (Trinidad and Tobago); Norsk Hydro in phosphate fertilizer production and marketing; Wilbur Ellis Company in crop protection
product marketing and distribution; U.S. Premium Beef in beef packing; and Kansas State University
in agricultural research. Farmland also owned Tradigrain, a group of international grain trading companies headquartered in Geneva, Switzerland.
The company operated on a cooperative basis. The member/owners shared numerous commercial and financial benefits, including the sharing of costs for the processing and marketing of goods, competitive prices, and better supply and delivery capabilities.
In June 1999 it broke ground for a 280000 square feet (26,012.9 m²) headquarters on a 40 acres (161,874.4 m²) campus just east of Kansas City International Airport
to consolidate the offices for 1,000 employees. The building was completed in 2001.
The cooperative entered Chapter 11 bankruptcy
in May 2002 after failing to secure a $500 million loan to meet lender demands on cash requirements (in its filing it listed $2.7 billion in assets and $1.9 billion in debt).
It was affected by a prolonged downturn in fertilizer
prices, coupled with high energy prices and capital costs. The reorganization process resulted in the sale of virtually all of the company's assets, including the following subsidiaries: Farmland Foods, Inc., the pork processing division to Smithfield Foods
for $367M; Farmland National Beef Packing Company to US Premium Beef for $232M; and the fertilizer production division to Koch Industries
.
The Co-op Retirement Plan, which provides a final salary defined benefit retirement plan for member cooperatives' employees, was administered by Farmland. A non-profit, United Benefits Group, was incorporated to take over this service, from 2003.
The reorganization process resulted in the sale of the cooperative's assets, with all creditors repaid by 2006. According to JPMorgan, the liquidating trustee, unsecured creditors received $891 million, which was 104 cents on the dollar, the maximum allowed by law, and allows for interest.
Before the liquidation
was completed, it was accepted that no assets remained to be distributed to the members, the local cooperatives, who had to write off the loss of their equity account
balances. A 2004 study in Oklahoma suggested that the biggest impacts on cooperatives were on farmer relations and lost business relationships, and the direct financial impact of the write off was low.
The Farmland brand and its slogan "Good Food From the Heartland" is now owned by Smithfield Foods
Smithfield Foods
Smithfield Foods, Inc. is the world’s largest pork producer and processor. Headquartered in Smithfield, Virginia, it runs facilities in 26 U.S. states, including the world's largest meat-processing plant in Tar Heel, North Carolina, and has operations in Brazil, China, France, Mexico, Poland,...
. While owned by Smithfield Foods, Farmland Foods, Inc. operates independently and continues to market meat products under the Farmland brand.
History
At its peak, the organization was the largest agricultural cooperative in North America, owned by 1,700 farm cooperative
Cooperative
A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...
s in the United States, Canada and Mexico, which cooperatives were in turn owned by more than 600,000 farmer families. It had 16,000 employees in all 50 states and 90 countries. In 1977 it ranked #78 on the Fortune 100 company list. In 2001, its annual revenues were in excess of $11.8 billion. It was listed as one of Fortune's "most admired" companies. It ranked #170 on the Fortune List when it dissolved.
The cooperative provided both agricultural supply and marketing services ranging from petroleum refining, fertilizer manufacture, feeds, shipping, crop production, livestock production, and refrigerated foods sales and marketing. The company was a joint venture partner with a number of other companies, including: Archer Daniels Midland
Archer Daniels Midland
The Archer Daniels Midland Company is a conglomerate headquartered in Decatur, Illinois. ADM operates more than 270 plants worldwide, where cereal grains and oilseeds are processed into products used in food, beverage, nutraceutical, industrial and animal feed markets worldwide.ADM was named the...
in grain storage, distribution and marketing; Simplot
Simplot
The J. R. Simplot Company, commonly referred to as Simplot, was founded in 1923 by 14-year-old J. R. Simplot near the small agricultural community of Declo in south central Idaho. J. R. Simplot led his company to tremendous growth in the period between its founding and World War II...
in phosphate production; ConAgra in wheat marketing; Land O'Lakes
Land O'Lakes
Land O'Lakes is a member-owned agricultural cooperative based in Arden Hills, Minnesota, focusing on the dairy industry. The co-op states that it has about 3200 producer-members, 1000 member-cooperatives, and about 9000 employees who process and distribute products for about 300,000 agricultural...
in feed systems and crop nutrients; Cenex
Cenex
Cenex, or the Centre of Excellence for Low Carbon & Fuel Cell Technologies, is a UK industry-led public-private partnership, i.e. a UK government initiative set up and supported by the Department of Trade and Industry...
Harvest States in lubricants, propane and refined fuels; Mississippi Chemical in nitrogen production and shipping (Trinidad and Tobago); Norsk Hydro in phosphate fertilizer production and marketing; Wilbur Ellis Company in crop protection
Crop protection
Crop protection is the branch of horticulture concerned with protecting crops from pests, weeds, disease and theft.It encompasses:* Pesticide-based approaches such as herbicides, insecticides and fungicides...
product marketing and distribution; U.S. Premium Beef in beef packing; and Kansas State University
Kansas State University
Kansas State University, commonly shortened to K-State, is an institution of higher learning located in Manhattan, Kansas, in the United States...
in agricultural research. Farmland also owned Tradigrain, a group of international grain trading companies headquartered in Geneva, Switzerland.
The company operated on a cooperative basis. The member/owners shared numerous commercial and financial benefits, including the sharing of costs for the processing and marketing of goods, competitive prices, and better supply and delivery capabilities.
Bankruptcy
The company loaded up on debt in the 1990s.In June 1999 it broke ground for a 280000 square feet (26,012.9 m²) headquarters on a 40 acres (161,874.4 m²) campus just east of Kansas City International Airport
Kansas City International Airport
Kansas City International Airport , originally named Mid-Continent International Airport, is a public airport located 15 miles northwest of the central business district of Kansas City, in Platte County, Missouri, United States. In 2008, 10,469,892 passengers used the airport...
to consolidate the offices for 1,000 employees. The building was completed in 2001.
The cooperative entered Chapter 11 bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
in May 2002 after failing to secure a $500 million loan to meet lender demands on cash requirements (in its filing it listed $2.7 billion in assets and $1.9 billion in debt).
It was affected by a prolonged downturn in fertilizer
Fertilizer
Fertilizer is any organic or inorganic material of natural or synthetic origin that is added to a soil to supply one or more plant nutrients essential to the growth of plants. A recent assessment found that about 40 to 60% of crop yields are attributable to commercial fertilizer use...
prices, coupled with high energy prices and capital costs. The reorganization process resulted in the sale of virtually all of the company's assets, including the following subsidiaries: Farmland Foods, Inc., the pork processing division to Smithfield Foods
Smithfield Foods
Smithfield Foods, Inc. is the world’s largest pork producer and processor. Headquartered in Smithfield, Virginia, it runs facilities in 26 U.S. states, including the world's largest meat-processing plant in Tar Heel, North Carolina, and has operations in Brazil, China, France, Mexico, Poland,...
for $367M; Farmland National Beef Packing Company to US Premium Beef for $232M; and the fertilizer production division to Koch Industries
Koch Industries
Koch Industries, Inc. , is an American private energy conglomerate based in Wichita, Kansas, with subsidiaries involved in manufacturing, trading and investments. Koch also owns Invista, Georgia-Pacific, Flint Hills Resources, Koch Pipeline, Koch Fertilizer, Koch Minerals and Matador Cattle Company...
.
The Co-op Retirement Plan, which provides a final salary defined benefit retirement plan for member cooperatives' employees, was administered by Farmland. A non-profit, United Benefits Group, was incorporated to take over this service, from 2003.
The reorganization process resulted in the sale of the cooperative's assets, with all creditors repaid by 2006. According to JPMorgan, the liquidating trustee, unsecured creditors received $891 million, which was 104 cents on the dollar, the maximum allowed by law, and allows for interest.
Before the liquidation
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...
was completed, it was accepted that no assets remained to be distributed to the members, the local cooperatives, who had to write off the loss of their equity account
Ownership equity
In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists...
balances. A 2004 study in Oklahoma suggested that the biggest impacts on cooperatives were on farmer relations and lost business relationships, and the direct financial impact of the write off was low.