No Bucks in Aberdeen Beef?

Jul 24, 2013

By Cory Allen Heidelberger

 

This week's bankruptcy declaration by Northern Beef Packers in Aberdeen is good news for nobody. Around 300 workers (those who survived the April layoffs) can't get their paychecks. 277 creditors — including local contractors and beef suppliers — are left holding the bag, wondering if the Chapter 11 proceedings will shake loose any of the money NBP owes them. Livestock producers who still believe in NBP's business model are left with one less local buyer competing for their product. A city that has bent over backwards to help NBP through its long, arduous planning and building phase with a TIF district and other help now stands with zero return on its investment.

The only good side of NBP's bankruptcy is the opportunity for a serious conversation about at least two important questions about economic development in South Dakota:

1. Why hasn't Northern Beef Packers succeeded? On paper, NBP proposes a business model all South Dakotans should love. NBP wants to crack the big meatpackers' oligopoly. It wants to create an opportunity for northeast South Dakota livestock producers to sell their product locally, lowering producers' transportation costs and boosting their profit margins. It supports the South Dakota Certified Beef program, a struggling project started by Governor Mike Rounds in 2005 to differentiate our beef in the marketplace and further boost our cattle business.

Does NBP's failure show that there's no beating the big packers? Does it show nobody is really that interested in beef stamped "South Dakota"? Or does it show that the folks running NBP just don't know what they're doing, and that an untapped opportunity awaits some savvy entrepreneur?

2. Why has the State of South Dakota given Northern Beef Packers so much help? NBP could not raise enough capital from local investors to get off the ground. The state of South Dakota had to jump start it by lining up foreign investors to pay $500,000 each in return not for profits but for green cards. (This exchange is the EB-5 Immigrant Investor program, facilitated in South Dakota by the South Dakota Regional Center, a technically private company created during the Rounds administration to manage the Governor's Office of Economic Development's EB-5 efforts.) For NBP alone, South Dakota has recruited 160 foreign investors who have invested $80 million dollars, without which NBP would not exist.

Is any one business in South Dakota worth that much hustle from Pierre? Is it in the state's best interest to solicit investments in risky business ventures from outside investors who do not have to live with the local consequences of those ventures' failures?

The immediate priority in Aberdeen should be to pay workers and creditors and minimize the economic damage. But Aberdeen and South Dakota need a longer-term conversation about prospects for the local beef market and the wisdom of state involvement in the EB-5 program and economic development.

(Say, that Rounds fellow—isn't he running for some public office or another? Isn't he in a position to answer questions and lead a public conversation about topics like this?)

 

Editor's Note: Cory Heidelberger is our political columnist from the left. For a right-wing perspective on politics, please look for columns by Dr. Ken Blanchard every other Monday on this site.

Cory Allen Heidelberger writes the Madville Times political blog. He grew up on the shores of Lake Herman. He studied math and history at SDSU and information systems at DSU, and has taught math, English, speech, and French at high schools East and West River.