The end of the line for FBO

Future Beef Operations have not been able to find new financial backing, their Arkansas City packing plant is shut, 900 employees are now out of work and the last of the six founding partners, John Meetz has left the company. According to Meetz, the most likely scenario is a liquidation of assets. Even at bankruptcy prices, Future Beef is expensive enough to require a buyer of some substance. The big four: Tyson/IBP, Excel, Farmland and ConAgra are unlikely to buy according to experts. Excel and ConAgra have been busy recruiting workers for their locations elsewhere, which would appear to put them out of the picture. Tyson's acquisition of IBP is recent enough to keep them fully occupied with restructuring and Farmland are dealing with Chapter 11 bankruptcy themselves. Mid-August will see FBO's bankruptcy status move on to Chaper 7 liquidation. A trustee will then be appointed to represent the creditors and the court will also decide which debts are to be repaid. Only after the debts have been paid are potential buyers likely to reveal themselves. The large retail store group Safeway Inc own 15% of FBO and accounted for 51% of their sales. The costs of buying and feeding the special cattle for the operation greatly exceeded expectations. Safeway originally agreed to finance the additional expense but as of June 30 still owed FBO $13.9 million. Safeway are also reported as refusing to pay 7c/lb more for the company's products. Production was geared up very much to suit Safeway's requirements, making it difficult for the company to attract other large customers. Ronnie Green, vice-president of cattle operations, who is acting as the company's liaison with the court, said: 'The timing is really ironic'. Last month (July), there was a nationwide recall of 18.6 million lb of ground beef produced by ConAgra in Greely. The beef was suspected of being tainted with a deadly strain of E.coli and dozens of people became ill after eating ground beef sold by Safeway. Future Beef operate a higher level of food safety procedures but such rigorous standards bring additional costs. Court records show that FBO lost $53.5 million in 2001 and a further $11.3 million in the three months between March and June this year. FBO filed for Chapter 11 on March 4 but continued to operate with 900 workers. On July 22, they laid off 100 employees and on August 1 they ceased slaughtering.