News, notes, and observations from the James River Valley in northern South Dakota with special attention to reviewing the performance of the media--old and new. E-Mail to

Sunday, July 8, 2012

Will there ever be any beef here?

Northern Beef Packers continues to inspire doubt and despair in the Aberdeen community.  The local newspaper has put together a special online section on the company, most of which chronicles the mechanics' liens filed against it for non-payment of its contracting bills.  This year alone, 13 liens for $1.3 million have been filed against it, and some contractors have abandoned their work until they are paid. 

 The shady origins in the formation of the company shadow its efforts to be viable.  This shows up in its inability to pay contractors.  Some of the development capital was expected to come from its sale of TIF bonds.  The Northern Beef Packer TIF bonds have not found an enthusiastic market.  Part of the reason is that TIF bonds throughout the nation have not found a vigorous market.   Investors are looking for more vigorous financial returns, and stocks, despite the tepid economy, are performing well.  The President of NBP says the contractors will be paid when all the TIF bonds are sold.  But investors are wary of a company that has cultivated such a bad relationship with its contractors.  

As a business venture, NBP was proposed as a packing business in Huron, which has had a long history of the business, but has largely been abandoned by the packing industry.  It has a turkey processing plant, which involves participation by the Hutterite colonies.  Then the plant was proposed for Flandreau, but was abandoned when its promoters  were accused of bad faith and development funds seemed to be misused.

The promoters then found some people in Aberdeen who were sold on the idea.  From the outset,  the project caused some doubt because of a shakey business plan, exacerbated by some intrusion by people with loopy business schemes.  Some of the principles in the project's start up postured as savvy and hard-nosed businessmen, but had no real acumen about to establish and develop a company.  They floundered, and some of the local supporters compounded the mistakes with fatuous and presumptuous pronouncements that turned off knowledgeable and shrewd investors and supporters.  The company was distracted and misdirected its efforts with subsidiary projects which were silly, if not fraudulent.  An example was a a scheme to divert the plant's waste water into holding ponds and then sell it to farmers for irrigation.  

On the positive side, the idea for a regional beef packer had merits.   It came at a time when a significant number of consumers have become dissatisfied with beef from the big four processors (Tyson, Cargill, JBS, and National Beef Packers).  Consumers are concerned about the chemicals, anti-biotics, and hormones used to produce beef in the huge feedlots and the confinement operations. The diet trend is to eat less red meat, and that puts an emphasis on quality.  In turn, that creates a trend for buying meat which has traceable origins, is largely grass fed, and does not come from factory beef production.  The management which has taken over NBP at one point announced provisions for producing specialty beef, including South Dakota Certified Natural Beef, Northern Beef Packers Premium Black Angus Beef, Northern Beef Packers Premium Beef, and Northern Beef Packers Grass-fed and Pasture-fed beef (with enough customer interest).  However,  only South Dakota Certified Beef is currently listed on the company's website

The company has expressed confidence that the Dakotas and Nebraska produce enough beef to keep the plant supplied, and producers see profit potential in a regional plant which reduces their shipping costs for cattle.  Beef producers are among the  most hopeful supporters of the plant, but the constant delays and problems with paying contractors give them qualms, too.  

Late last week, the Meat and Poultry Journal reported that NBP's financial problems were solved and the plant intended to open within the next few weeks.  No date was specified, nor were any detail given on the finances.

Much of the financing for the plant has come from foreign investors under the EB-5 program which gives the investors immigrant green cards for making a minimum investment of $500,000.  In a story in today's Aberdeen American News on that program, a July 15 date is cited for the plant opening.   

That is a week away, but no specific information was provided about when workers will report and when incoming shipments of cattle will be received.

The plans remain vague and unsettled.  And skepticism mounts.   

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Aberdeen, South Dakota, United States