Beef: Premium beef venture runs aground, leaving farmers out of pocket

Tuesday, February 3, 2009

When a Grey County operator offered beef producers well above the going rate for cattle raised on an 'all-natural diet,' even the local MPP got excited.  But then the payments slowed and stopped

by MARY BAXTER and DON STONEMAN

A well-publicized scheme which promised Grey-Bruce farmers $2,000 for a steer that would fetch less than $1,400 in regular markets has collapsed. One producer claims that he's owed more than $100,000. Industry leaders caution producers to look before they leap.

In April 2008, Darryl Williams and Mark Kuglin, operators of All County Feed & Grain Ltd., located near Goring, east of Markdale, offered big prices for cattle raised on "an all-natural diet," free of antibiotics and growth hormones. They called the venture Grey-Bruce Beef Marketing Ltd. and planned to sell locally produced beef to Ontario restaurants, stores and food services.

Bill Murdoch, Grey County's MPP, endorsed the venture in the Ontario Legislature on April 22. It was a "great concept," he said in January after learning of the collapse. "I was excited about it." Newspapers such as the Owen Sound Sun Times, the Toronto Star and local weeklies published glowing articles.

In December, suppliers discovered that the All County store/warehouse was closed and the phone disconnected. Williams did not return calls at press time in early January. Sources report that he was holidaying out of the country. Kuglin, reached by telephone, admits that highly touted standards for raising cattle weren't enforced. He confirms claims by some food distributors, who say they were named as outlets on the company's website without their permission. Customers receiving a big shipment of meat to supply festivals in Ottawa refused to pay for it in full. Kuglin says that the Ottawa department of health got involved and some meat was condemned because of improper labelling. Kuglin refuses to specify the losses, saying only that the investment was "massive."

A provincial cattle-dealing license, issued to All County on June 16, 2008, was revoked on Sept. 22 because the company failed to pay producers, says Brent Ross, a spokesperson for the Ministry of Agriculture, Food and Rural Affairs (OMAFRA).

Launched in 2006, All County Feed & Grain Ltd. initially sold cattle and horse feeds and supplements. Jones Feed Mills Ltd., based in Linwood, was a feed supplier.

The community greeted All County's beef venture with great enthusiasm last spring, says Ray Robertson, manager of Grey Agricultural Services, a non-profit organization that serves as an information hub for the county. He says that difficult markets drove people to participate in some programs which were "a stretch sometimes, but the options weren't all that great."

In the Ontario cattle market in April, steers weighing an average of 1,492 pounds sold for $1,252.53. Expecting to receive $2,000 each, Bar 5, a large cattle breeding operation near Markdale shipped about 80 head of cattle at the end of April and early May and verbally agreed to accept monthly installments on payments. Bar 5 bought feed from Kuglin when he was a Purina salesman for 15 years, before his involvement in All County. The farm sold beef through Williams' store in nearby Walters Falls.

For three months, Bar 5 received the agreed-upon payments. By the fourth month, amounts dwindled. In the fifth month, Andreas Buschbeck, the farm's operations manager, learned that other farmers also weren't getting paid. "I think everybody got paid a little bit, but nobody ever got paid in full." Buschbeck says that other producers agreed to a 30-day payment period and signed contracts.

Doug and Lois McComb and their son Dan were among those producers. Doug says that he signed a contract on June 17 promising $2,000 per head, less killing costs, within 30 days of delivery. The abattoir says killing costs were $35.

(According to the Ontario Cattlemen's Association, in June, steers over 1,250 pounds liveweight averaged 93 cents a pound, or $1.56 a pound dressed, with a 59 per cent yield returning about $1,367 – $10 less than the liveweight return.)

The McCombs' cattle ate feed provided by All County. Animals that were "needled" were removed from the program, Doug says.

The All County website says that producers "comply with strict on-farm audited feed, husbandry and animal management guidelines." Doug can't speak for others but says his farm was only audited at the beginning of the program and no one checked later.

The website also says that producers must be certified with the Quality Starts Here – Verified Beef Program sponsored by the Ontario Cattlemen's Association, but Doug saysthat he has never been certified for that program.

He says he was told that the high premium paid was because of the high prices All County was able to obtain for the meat. The company's website promoted the meat as lean, low in cholesterol, free of trans-fats, high in omega-3 fatty acids and selenium.  

At first, producers paid the slaughter costs. Later, All County paid them and the prices paid for cattle dropped to $1.65 a pound dressed weight.

The McCombs shipped 70 animals and Doug says that he's owed more than $100,000 and he knows 12 other producers who are also owed money. Producer losses range from less than $30,000 to more than $100,000.

Ray Robertson has fielded calls from 10 different producers. At first they wanted to know about the venture, but since September they've been asking how to recover their money. "Certainly I thought (Williams and Kuglin) were trying to pull things together at that time," he says.

Instead, more problems emerged, such as the suspension of the company's cattle dealer license.

The provincially-administered Ontario Beef Cattle Financial Protection program licenses cattle dealers and a fund compensates producers for 90 per cent of their losses when a licensed dealer defaults on payment. It advises producers to obtain payment within two days of sale or of grading a carcass and warns against extending credit to a dealer. Otherwise, a claim to the financial protection fund may be refused.

McComb says that he shipped 11 head on Oct. 29. Frey's Custom Meats, east of Mount Forest, last processed All County program cattle on Dec. 5. OMAFRA spokesperson Elizabeth McClung says that if a company buys cattle without a license, the ministry's regulatory compliance unit investigates. OMAFRA officials won't comment on All County.

Questions also arise about the claims the company's representatives made. The feed Jones Feed provided didn't include omega-3 enhancing ingredients, says salesman Paul Pletsch.

Paul Stiles, assistant general manager of the Ontario Cattlemen's Association, is amazed that All County promised to pay $1,000 for a cow and $2,000 for a steer, sight unseen. "How are they going to pay $1,000 for a cow when everyone else is paying $600-$700?"   

Some suppliers have fared better than farmers. The company's former landlord, Wayne Breadner, says that his tenants paid their bills and left "on reasonable terms." Frey's Custom Meats is owed payment on its last order.

By December, Jones Feed sold All County feed only if they paid cash up front because of an outstanding debt, says Pletsch.

Buschbeck says Bar 5 will absorb the $30,000 loss, but he says some producers are considering legal action. If the business' owners want to make things right, he says, they're "obviously going the wrong way about it by not talking to people and walking away."

Stiles advises that "if it sounds too good to be true, get your lawyer to look at it before you sign a contract." He says All County's license suspension motivated the publication of an article about the financial protection fund in the association's magazine.

Staff Sgt. Rick Sinnamon with the OPP's Grey County detachment, cannot confirm if police are investigating the situation. "We know these two individuals, that's as much as I can say," he says.

Kuglin says that he would like to help the 15 or so farmers involved but can't. He says he was a minority shareholder in the limited company and was forced out in December, receiving an ultimatum by text message. Documents filed Dec.12, 2006, when the company was incorporated, show Williams as president, secretary and treasurer. William's has not been available for comment. BF

For the latest on this story see our website:  www.betterfarming.com