Farmland's Woes Not Expected
To Impact U.S. Premium Beef

KANSAS CITY, Mo. — Farmland Industries, the nation's largest farmer-owned cooperative, filed for Chapter 11 bankruptcy protection last week, but U.S. Premium Beef’s CEO, Steve Hunt, says that action will have no effect on them nor will it affect National Beef.

"The key to remember is that USPB is not in Chapter 11 and neither is National Beef," Hunt reiterates. "The other key point is that we’re making money. We have a very successful business."

FNB, Hunt stresses, is a completely separate entity and none of Farmland National Beef’s assets are pledged to Farmland’s loans or to their creditors which, in short, means that none of their operational assets are pulled into this bankruptcy filing.

USPB struck a deal with Farmland Industries in 1997 to form Farmland National Beef L.L.C, formerly National Beef. USPB owns approximately 30 percent of the company. Today FNB is the fourth largest beef processor in the U.S., processing some 2.8 million head annually. Their processing capacity has increased 70 percent since 1992 with plants in Liberal and Dodge City, Kansas.

USPB, Hunt says, has been extremely pleased with their partnership with Farmland, and they hope that Farmland will be able to work through the bankruptcy so the partnership can continue long into the future.

Farmland reportedly has no interest in selling their beef business at this time, and Hunt doesn’t want to speculate except to say that if it should come to that at some point in the future, USPB is prepared to step up to the plate.

"Should Farmland at some point decide or parties tied to their bankruptcy decide that Farmland should sell its interest in National Beef, clearly USPB as a partner has priority rights in that process and would be interested in exercising that right to buy out Farmland’s interest," he says. "We’re in position to buy it, but again the partnership has worked extremely well and we’re hopeful that Farmland through this action can get in a position to maintain the partnership."

Hunt says they were aware that Farmland had been experiencing some level of financial difficulty over the last year or two, particularly in their fertilizer division, but the CEO says it’s not fair to draw any broad conclusions about farmer-owned cooperatives based on or because of Farmland’s difficulties.

"I do feel the new generation cooperatives such as USPB probably fit the times better as they have the ability to raise capital and operate more like traditional business structures like corporations.

"As a new generation cooperative, USPB issues shares and raises equity by the selling of shares. That is one of the distinctions we hold relative to Farmland Industries," he notes.

USBP has had a successful run since its startup in 1997, and that success continues despite extremely tough financial conditions throughout the entire beef sector.

"It’s an exciting time for our members as they are enjoying record premiums over our grid program and good earnings," Hunt comments. "Certainly, we’ve gone through a very difficult time on the feeding side and we hope that we can get prices back to a profitable point again soon, but the premiums that our members have realized, especially the first few months of 2002 when premiums averaged over $25 a head, that along with earnings of our company has sure put our members in a position to better withstand the storm that we’re currently facing.

"One of the reasons for putting USPB together," he continues, "was so producers would be able to realize processing earnings. While our earnings are not above last year’s numbers, we are realizing profitability at the processing company."

Hunt says it’s too early to tell how things will fall out with regard to Farmland’s brands. Those include Farmland Black Angus® Beef, Certified Premium Beef®, and Black Canyon™ Angus Beef.

"For now those brands continue to be utilized through our partnership, and we expect them to continue to be utilized."