Minnesota hog farms say they were fleeced by Windom pork plant's bankruptcy

The HyLife pork plant in Windom, Minn., owes money to an increasingly long list of creditors that now includes hog farmers, according to bankruptcy filings.

On May 12, attorneys for farmer Greg Strobel filed a court document in Delaware testifying that his farm transferred hogs to HyLife Foods in Windom the same day the pork slaughterhouse filed for bankruptcy.

More of his hogs were delivered into HyLife's possession the next day, April 28. The Pemberton, Minn., farmer, and many others like him, have yet to be paid for those deliveries as the list of HyLife's creditors grows in bankruptcy court.

HyLife owes Strobel more than $950,000, his attorneys said in a court filing, "Strobel Farms operated under the Agreement and delivered [hogs] to [HyLife] on April 27 and 28."

The fallout from HyLife Windom's sudden demise — including a shortfall in the local school's funding, an unfinished housing project and the city's wastewater treatment upgrades — continues to ripple throughout the region.

More than 1,000 workers will likely be laid off at the start of June, and bankers, contractors and electricians who are owed money are filing petitions in the pork processor's bankruptcy case, seeking to claw back what they are owed.

Strobel is one of a number of hog farmers, many from Minnesota, who have begun submitting creditor claims — for animals they raised and delivered to the slaughterhouse, but for which they were never paid — in the Manitoba-based pork processor's bankruptcy proceedings. The plant processed about 5,600 pigs daily and had contracts with farmers across the region.

Under rules from the 101-year-old federal Packers and Stockyards Act, Strobel's attorney said he should've been paid for transferring the pigs by the close of business the next day.

Established in 1921 as a response to unfair manipulation of prices by an increasingly concentrated meatpacking industry, the Packers and Stockyards Act ensures that buyers must pay livestock producers engaging in a cash sale by the following business day's end.

Furthermore, livestock farmers jump to the front of the creditor line in a bankruptcy proceeding, said Jennifer Zwagerman, director of the Drake University Agricultural Law Center.

"It's similar to an indemnity fund," she said. "If you are owed by a packer and you file a claim within 30 days, you get priority as assets are distributed [from the bankrupt entity's estate]."

Strobel and his attorneys did not respond to multiple requests for comment. A spokesman for HyLife cited the ongoing legal matter in declining to answer questions.

Many farms mentioned in the bankruptcy filings — such as Sleepy Eye's Schwartz Farms and Granada's Hugoson Pork — also did not respond to requests for comment. John Giefer of Gaylord's Wakefield Pork referred all questions to Minnesota Pork.

"The plant closure will require pig farmers to look for different markets for their pigs, likely moving them to other processing plants in Minnesota or out of state," Minnesota Pork CEO Jill Resler said in a statement. "This difficulty is compounded by the lower prices farmers are currently receiving for their pigs."

Hog prices have seen steep declines at the start of 2023. On Thursday, the average weighted price for Iowa and Minnesota hogs was $87.31, according to the U.S. Department of Agriculture. A year ago, that price-per-hundredweight was more than $113.

Minnesota's pork industry, which totaled $2.7 billion in 2019 sales with 22.3 million hogs sold, trails only Iowa in its value, according to a University of Minnesota Extension report.

Since filing for bankruptcy last month, attorneys for HyLife have requested and received approval from U.S. District Judge Thomas Horan to spend $1.2 million to pay back farmers who delivered hogs before the company's bankruptcy filing on April 27.

But they've claimed an April 28 line-in-the-sand to reject contracts with two farms — Strobel's and hogs owned by Minnesota billionaire Glen Taylor.

Hog contracts with both companies, HyLife said in a court filing, are "no longer necessary or beneficial" to paying off creditors during the bankruptcy process.

A representative for Taylor, who owns the Star Tribune in a separate business venture, did not return a request for comment.

In their May 12 filing, Strobel's attorneys objected to HyLife's timeline, announcing they will send a letter to the USDA, noting that HyLife is delinquent on two payments totaling $954,148.

Such a letter could trigger the creation of a trust that, under the century-old packers' law, would protect pig farmers left in the lurch by buyers.

HyLife's bankruptcy filing, announced just two weeks after the plant announced plans to layoff workers, will affect many area businesses. One of the largest creditors, Mankato general contractor RW Carlstrom, is owed nearly $540,000 for work done to expand the plant.

"It was news to us when we heard [the plant] was going up for sale," said Scott Umhoefer, the company's president. Asked if they expect to receive payment, he replied, "I hope we do."

The plant closure has also stoked concern among some Windom residents. The city relied on fees generated by the massive pork plant to fund a new sewer upgrade. The local school may lose teachers with the anticipated enrollment drop. And many workers may need to return to Mexico before reaping the financial incentives they were promised, as hundreds are in the state on H-2B visas.

The farmers who raise the hogs and deliver them to the plant for slaughter are now left with millions of dollars of animals in barns they won't be able to deliver to HyLife after the plant closes in early June.

Meanwhile, the bankruptcy petition is proceeding rapidly. On Friday, Judge Horan approved a motion for the company to auction off the Windom plant later this month. HyLife plans to present the new buyer to the court for approval on June 2.