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ALBERT LEA, MN-Farmland Industries, the large farm cooperative based in Kansas City, MO, had planned to build a new $86-million, 380,000-sf pork processing plant here. But that was assuming it would work out its disputes with insurance companies, and before it filed for reorganization under bankruptcy laws this week..

The farm cooperative is still negotiating with insurance companies over whether the plant should be declared a total loss or partially repaired. Meanwhile, the company receivedan unsolicited offer from Smithfield Foods to buy Farmland’s meat operations.

“Our next step on the Albert Lea project remains getting our insurance claims resolved,” says Sherlyn Manson, a spokesman for Farmland. “We continue to ask the insurance companies to work toward an immediate settlement.”

If that is resolved positively, then the company can present plans to the bankruptcy court, she says.

Assuming it’s built, the plant, which would replace a plant that burned down last July, would employ more than 700 workers. The plant would process pork into 200 million pounds per year of ham and packaged pork products.

Last month, the Minnesota Legislature agreed to provide an array of economic incentives to Farmland to rebuild the Albert Lea plant, including the extension of a tax increment financing district, a sales tax exemption on building materials, aid to the Albert Lea school district and an extension of unemployment benefits for displaced workers.

Before the complications, construction was expected to start this summer, with plans to have the plant operational late next year. The company intends to construct at the site–an industrial park not far from Interestate 35–90 miles south of the TwinCities.

Farmland filed for Chapter 11 reorganization late last week in US Bankruptcy Court in Kansas City, becoming the largest farmer-owned organization to seek such protection from creditors in US history. The co-op, which had $11.8 billion in sales in its most recent fiscal year, blamed a tight cash-flow problem that became unmanageable when bondholders sought early redemption of subordinated debt.

Rival Smithfield Foods’ unsolicited bid for Farmland’s profitable meat processing operations–an offer rejected by the company–added uncertainty to the situation.

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