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Published: 4/21/2009

Toledo area dairies in trouble as costs rise, prices fall

BY GARY T. PAKULSKI
BLADE BUSINESS WRITER

Rinke and Afke Oenema sold their dairy farm in the Netherlands, packed up their family, and started over in Henry County in 2003.

But six years later, their Maple Grove Dairy LLC of Pleasant Township is in Chapter 11 bankruptcy and seeking court permission to send its herd to slaughter.

And the Oenemas aren't the only dairy farmers who are in trouble.

Falling milk prices and rising feed costs are forcing many dairy farms to the brink.

Cooperatives Working Together, a five-year-old organization that works to stabilize dairy prices, said interest is high in a "herd-retirement" program that sends cows to slaughter to reduce milk supply.

Applications aren't due until May 1. But more than 1,600 members have used a calculator on the firm's Web site set up to help farmers decide whether to participate.

"Milk prices have deteriorated and production prices, or input, are higher than they have been in the last four or five years," said Walt Woosje, program director. "The squeeze is such that there is very little, if any, [profit] margin."

A second northwest Ohio farm, Arts Dairy LLC of Convoy, in Van Wert County, filed last week for Chapter 11 protection in U.S. Bankruptcy Court in Toledo. The firm said it has $7.6 million in debts and $2.8 million in assets.

Nathan Hall, the firm's Toledo lawyer, declined comment. Owners Henk and Helma Arts couldn't be reached.

The farm, which owns 1,250 cows, has 11 employees, according to filings in the court case. It had income of $5.1 million last year, down 10 percent from 2007.

The couple said in bankruptcy filings that they turned to the court when they were unable to pay $1.8 million owed Jan. 1 to AgStar Financial Services, Mankato, Minn.

In addition, they also owe the lender $4.5 million on a note due in 2021 and $122,000 on a note due in 2012.

An initial meeting of creditors is set for 11 a.m. June 4 at the Ohio Building in Toledo.

The case is assigned to Judge Richard Speer.

In the Maple Grove Dairy case, Judge Speer set a hearing for April 27 on the owners' request to sell their cows through the herd-retirement program.

AgChoice Farm Credit, Chambersburg, Pa., is trying to block the sale. The lender, the farm's largest creditor, is owed $3.1 million, according to documents in the case filed Feb. 25.

Maple Grove is challenging the validity of loan agreements on technical grounds.

Neither the Oenemas nor their attorney could be reached for comment.

The case was converted to a general business Chapter 11 case after it had been filed as a Chapter 12, intended for family farms.

Maple Grove lost $580,000 last year after making of $85,000 in 2007.

The farm listed $7.2 million in debts and $5.1 million in assets.

Court filings show the Oenemas were beset with problems from the start: miscalculated property taxes, a smaller herd than was needed for viability, and cows sickened by exposure to small electrical charges in a phenomenon known as "stray voltage."

"The challenges, coupled with the significant drop in the price of milk and the rising costs for feed, transportation, etc., have substantially undermined the viability of the operations," lawyers for the owners said.

Now, Maple Grove owners said, they plan to "wind down" business operations and sell assets.

Contact Gary Pakulski at:

gpakulski@theblade.com

or 419-724-6082.



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