DES MOINES, Iowa (DTN) -- Agriculture Secretary Tom Vilsack is defending USDA's oversight of its loan guarantees and grants to small- and mid-sized processors after Republican lawmakers this week demanded accountability for $45.6 million provided to an Iowa broiler processor that shut down and forced the state of Iowa to cull 1.3 million healthy chickens on 13 farms.
As DTN has reported, the Iowa Department of Agriculture and Land Stewardship (IDALS) last month was faced with feeding the 1.3 million broiler chickens and eventually depopulating the flocks after Pure Prairie Poultry shut down its operations at a northern Iowa processing facility at the end of September.
Pure Prairie Poultry's shutdown affected growers in Iowa, Minnesota and Wisconsin, though the largest number of chicken farms were in Iowa. Growers were left scrambling to try to feed and care for roughly 2 million total chickens. Farmers in some cases resorted to offering free chickens to people who would come and take them.
IDALS ended up culling chickens after finding a potential processor willing to take the birds only to have that plan quashed by creditors in court.
Republican members of Congress from the three states, along with GOP leaders on the U.S. House and Senate Agriculture Committee, wrote a letter to Vilsack this week demanding answers about USDA's oversight of its loan guarantee and grant programs. Pure Prairie Poultry was among the first companies to receive a loan guarantee ($38.7 million) and grant ($6.9 million) in 2022 when the Biden administration made an aggressive push to expand processing capacity nationally.
In a press conference Thursday, Vilsack defended USDA's overall loan portfolio following Pure Prairie Poultry's collapse. All told, more than 400 projects were funded in some way or another, the secretary noted, through the multiple loan guarantee and grant programs. That led to a total of $1.4 billion invested not just by USDA but investors and lenders. The collapse of the broiler processor was "an unusual circumstance," the secretary said.
In USDA's overall $250 billion or so loan portfolio, Vilsack said the loan success rate is close to 97%.
"You can compare and contrast our portfolio and its performance to any commercial bank in the country -- any commercial bank -- the default rate is very, very low," he said.
Discussing the loan guarantee program, Vilsack said USDA works with the lender, but banks do the underwriting. "The bank basically does the determination that they are willing to lend the money, and if they have the USDA guarantee, they're more willing to lend the money. Often times, the interest rate is impacted and affected."
"So, we work collaboratively with the bank, and it's just a similar circumstance to any other business where the business goes in, borrows money from the bank and makes the payments or doesn't make the payments. And the bank basically has a decision to make, and if they decide to foreclose, then at some point our guarantee is triggered."
For the producers who lost income growing chickens for Pure Prairie Poultry, Vilsack said they should have access to state indemnity programs. Also, USDA is seeking to file claims for producers in bankruptcy court under the Packers and Stockyards Act. Under the "dealer trust" provisions, producers potentially could be given preference when the court decides how to divvy up proceeds from any assets sold to pay off claims.
"We've been encouraging folks to fully utilize their right under the Packers and Stockyards to file a notice of claim," he said. "That gets them on the list and provides them with a priority."
The secretary said USDA won't know how much it will have to pay on the loan guarantee to the bank until the bankruptcy is resolved. Once the assets are liquidated and money is distributed, the bank will receive its funds. If the bankruptcy pays 80% of the loan value, then USDA comes in and pays a percentage of the deficit.
"It depends on how much the assets bring," he said.
The secretary declined to say if the creditors were wrong for stepping in and blocking the Iowa Department of Agriculture and Land Stewardship from securing a processor for the 1.3 million broilers that were culled instead of processed for food.
"I don't know the decision-making that they went through," he said, adding, "I just know that there were options, and ultimately, the options were to euthanize, which is unfortunate and tragic, but that's why you have an indemnity program. That's precisely why you have it, and it's a good program."
Ideally another company will reopen the processing plant in Charles City, Iowa, which is still considered a modern facility with its equipment.
"I'm hopeful that we find somebody who's willing to take it over and reopen it because obviously there's a need," Vilsack said. He added, "So there's a long way to go here, but for producers the goal hopefully is to get the thing reopened and everybody frankly should be working toward that."
Also see, "Iowa Forced to Cull Broiler Chickens Amid Bankruptcy and Creditor Claims," https://www.dtnpf.com/…
Chris Clayton can be reached at Chris.Clayton@dtn.com
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