Packers interested in big Canada hog farm hurt by feed costs

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WINNIPEG, Manitoba (Reuters) - Two Canadian pork processors are among those expressing interest in Canada's second-biggest hog producer, Big Sky Farms, which is looking for new ownership after soaring feed costs left it unable to pay its bills.

Big Sky, which produces about 1 million pigs per year and is based near Humboldt, Saskatchewan, entered receivership in early September. Manitoba-based hog producer Puratone Corporation is also up for sale, after entering court protection from creditors last month.

Both Toronto-based Maple Leaf Foods (MFI.TO: Quote) and Quebec-based Olymel L.P. are sizing up Big Sky, said Kevin Brennan, senior vice-president at Ernst & Young, the receiver for Big Sky. Big Sky is already a supplier to those companies' hog plants.

Some packers outside Canada are also interested, he said.

"There's a great deal of interest in terms of buying Big Sky," said Brennan, adding that Big Sky is for sale as a whole, not in pieces.

"They take a long-term view of the industry itself, and if there's a concentration of producers going out of business it provides opportunity for others to grow."

Maple Leaf spokesman Dave Bauer said it's premature to comment on any specific opportunities the company may have.

"We are evaluating several options that would secure our longer term hog supply," he said.

An Olymel spokesman could not be immediately reached.

A severe drought in the United States has decimated crops this year, which has led to higher costs for grains used to feed pigs. Rising feed costs have prompted some farmers to liquidate their herds, putting short-term pressure on hog prices and making losses worse for the remaining North American hog farmers.

Ernst & Young will ask a court next week to approve a sales process for Big Sky.

Saskatchewan Agriculture Minister Lyle Stewart said Big Sky should be an attractive acquisition for "major operators" in Canada looking to expand.

"I would expect it to be sold off more or less in one piece. It's too valuable an asset" to shut down, he said.

Big Sky owes about C$69 million ($70.4 million) to four secured creditors: lenders Bank of Nova Scotia (C$26 million), Bank of Montreal (C$16.7 million), National Bank of Canada (C$16.2 million) and Farm Credit Canada (C$9.8 million).

MANITOBA'S PURATONE ATTRACTS INTEREST

Despite the hog industry's problems, there are parties interested in buying Puratone as a whole, said court-appointed monitor Brent Warga of Deloitte.

Two parties filed expressions of interest with the monitor in buying all or most of the company, and a third group has also expressed interest. All were rejected, but the parties were invited to make new offers by mid-October, with the intent of a sale by October 22, according to court documents.

A Manitoba court this week extended Puratone's protection from creditors until November 2.

Puratone, which sells about 500,000 hogs annually, owes a total of C$86 million to three secured creditors: lenders Bank of Montreal (C$40.9 million) Farm Credit Canada (C$40.3 million) and the Manitoba government's farm insurance and lending corporation (C$5 million).

Both Big Sky and Puratone continue to feed pigs and pay staff as usual, and have not liquidated their herds.

Canada is the world's third-largest pork exporter and the biggest live hog exporter.

(Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Bob Burgdorfer)

 



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