Farmland Industries, largest farmer co-op, files for bankruptcy

KANSAS CITY, Mo. -- Farmland Industries, the nation's largest farmer-owned cooperative, announced Friday that it has filed for Chapter 11 bankruptcy protection.

Farmland will maintain its current operations through the reorganization, according to a release issued late Friday afternoon, but will make reductions in its workforce.

"This was a difficult decision for us," president and chief executive officer Bob Terry said in a prepared statement. "We fought to pull ourselves through this time of tight liquidity. Regrettably, we were unable to overcome one significant challenge -- aggressive early redemption demands from our subordinated debt holders."

Farmland has lost about $120 million in the last two fiscal years.

On Wednesday, the company paid its employees two days early. Workers said they were told to cash their checks within 24 hours.

The cooperative's third quarter ended on Friday, the same day that a $10 million payment was due on a $500 million loan it received in February.

Earlier this month, president and CEO Bob Honse retired at 58 after less than two years in the company's top operating jobs.

Some parts not included

Several companies owned or partially owned by Farmland are not included in the Chapter 11 action, the cooperative said.

They include Farmland National Beef Packing Co., the nation's fourth-largest beef packer; Agriliance, a fertilizer marketing joint venture with CHS Cooperatives and Land O'Lakes; and Land O'Lakes Farmland Feed, an animal feed joint venture with Land O'Lakes.

ADM-Farmland, a grain marketing company formed one year ago, is also not included in the action.

Lagging sales of fertilizer, the Kansas City-based farm co-op's biggest source of income, have left it with larger losses. The company lost $90 million in the fiscal year ending last Aug. 31, after a $29 million loss the year before. It recently reported a $49 million loss for its second quarter ended Feb. 28.

Heavy rains have cut into fertilizer sales this spring, following a winter drought that depressed the sale of fertilizer for the winter wheat crop.

In its latest quarterly filing with the Securities and Exchange Commission, Farmland mentioned the possibility that it could file for Chapter 11 bankruptcy protection. Honse later described that as a "worst case scenario" and said the company didn't expect it to happen.