Shelves Empty as Three Plants Stop Beef Production

By Nathaniel Popper

Published November 06, 2008, issue of November 14, 2008.
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Postville, Iowa — In developments that are already crippling the availability of kosher beef in large parts of America, three of the nation’s five largest slaughterhouses producing kosher beef halted production in the first week of November.

All eyes have been on the nation’s largest kosher slaughterhouse, here in Iowa, which stopped producing beef last week due to a series of legal problems and arrests at its parent company, Agriprocessors. That company, which filed for bankruptcy November 4, also owns a slaughterhouse in Gordon, Neb., which is thought to be the nation’s fifth-largest plant producing kosher meat. While little attention has been paid to the Gordon plant, local officials told the Forward that it stopped operating in October.

Then, in unrelated developments, executives at America’s third-largest kosher beef slaughterhouse, located in Minnesota, told the Forward that production there was brought to a complete halt due to a fire and to problems with insurers.

“We’re not killing anything right now,” said Bill Gilger, CEO of North Star Beef, which is located in Buffalo Lake, Minn. “We’re adding to the shortage of kosher beef, having nothing to do with what is going on in Postville, but just to do with our own situation here.”

Gilger said he was hoping to return to production on November 10, but that was dependent on his insurance company.

The leading certifier of kosher food, the Orthodox Union, has been attempting to find new supplies of kosher beef, but rabbis at the organization say there are few immediate opportunities.

“Everybody is running around, to use a metaphor, like chickens with their heads cut off,” said Rabbi Seth Mandel, who oversees slaughterhouses for the O.U. “Everybody is calling everyone else trying to find a solution, but no one is anywhere near finding a solution to this.”

The shortages already appear to be hitting supermarkets and restaurants. Jared Cohen, the chef at Max & David’s, a Philadelphia-area kosher restaurant, said that he has been changing the menu because of the inability to get certain meats, and his butcher has essentially no inventory because of the absence of Agriprocessors meat. “People are going to start charging even more than it’s worth because everyone’s looking for the same piece of meat,” Cohen said.

Menachem Lubinsky, a marketing consultant for the kosher industry, said he has heard about stores that have signs up announcing “No Kosher Meat.”

“In good times people could choose where they got their meat,” Lubinsky said. “Now you get what you can, and pay what you have to in order to stock the shelves.”

Lubinsky said he has been contacted by Israeli and Russian entrepreneurs looking to fill the void, but even if Agriprocessors finds new owners tomorrow, Lubinsky said the crisis will not be stayed. “I believe in the power of the market – and I’ve always felt that somehow things would shake themselves out,” he said, “but I can’t even look into the future and see any prospect for this.”

One possible alternative to the dilemma is Empire Kosher, a company that has, until now, produced kosher poultry and has discussed entering the beef market. Elie Rosenfeld, a spokesman for Empire, said the company was still in exploratory stages and that “there is no change as to our readiness to enter the market.”

Until this year, the dominant player in the kosher beef industry was Agriprocessors. In many parts of the country, Agriprocessors was the only meat available due to the company’s unmatched distribution system.

At its main slaughterhouse, in Postville, Iowa, the company had been killing more than 500 head of cattle a day in kosher production. That number grew smaller and smaller since an immigration raid in May took away nearly 400 of the company’s workers.

The plant stopped all production of beef a few days before a bank initiated foreclosure proceedings against the company on October 30 for a $35 million loan. On November 4, Agriprocessors put off foreclosure by filing for Chapter 11 bankruptcy protection.

In the bankruptcy filings, the owner of Agriprocessors, Aaron Rubashkin, stated that bankruptcy protection should halt the foreclosure temporarily while the company attempts to restructure, suggesting that Rubashkin wants to maintain control over the company. The filing says, “The Debtor is actively seeking new sources of financing and believes that it will be able to restructure its overall business.”

The company’s CEO, Bernard Feldman, did not respond to a request for comment.

Mandel said that even if Agriprocessors does find a new investor immediately, which will not be easy, “they are not going to be able to start full-scale production for a long time.”

In Gordon, Neb., Agriprocessors had been slaughtering nearly 150 cattle each day, according to the Gordon city manager, Fred Hlava. Hlava said that production ceased before the Jewish High Holy Days in October and has not started again.

Before the raid, Agriprocessors did a significant amount of beef slaughtering at a plant in South America. Those operations have also stopped.

Beef production at the North Star Beef facility in Minnesota had been sold under the label of Alle, a kosher meat company based in Queens. Alle slaughters its kosher beef at a handful of slaughterhouses owned by other companies. The largest slaughterhouse that Alle uses, Aurora Packing Company in Illinois, is still operating. Marvin Fagel, Aurora’s CEO, told the Forward that he is aware of the shortages.

“We can’t just make more products,” Fagel said. “We can’t work longer.”

North Star was Alle’s second-largest slaughter facility, where 330 cattle a day were in kosher production as recently as the last week of October, according to Gilger, the North Star Beef CEO. Alle representatives did not respond to calls for comment.

Gilger said that a fire in the slaughterhouse in June had affected the area where kosher meat was soaked and salted. Slaughtering had stopped for two weeks immediately after the fire, but had begun again. Recently, however, Gilger said that his insurance company had failed to cover the costs of the fire and that his company would not be able to begin slaughtering again until he worked out these financial problems.

“We’ve got a $3 million business interruption claim, and they haven’t paid a dime,” Gilger said.

In Houston, Levy Donin, the manager of HEB supermarket said that shortages are already being caused by the awareness of an impending crisis.

“We don’t have that much in reserve because people are freaking out,” Donin said. “They’re hearing the news and starting to buy more than they usually do.”

With reporting by Lana Gersten.

For complete Forward coverage of Agriprocessors and the kosher meat industry, click here.

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