Another $200K for creamery

PALMER — The Matanuska Creamery received another $200,000 loan from the state Board of Agriculture and Conservation this week despite a report questioning the group’s collateral.

Valley Dairy Inc., the company behind the local creamery, was established in 2008 to give local farmers an outlet for dairy products. In October of that year, the company approached the ag board for two loans from the Agricultural Revolving Loan Fund. In November 2008, the board approved both loans, a short-term “S” loan for $200,000 and a long-term “F” loan for $430,000.

At the request of then-Alaska Rep. Ralph Samuels, the Legislative Budget and Audit Committee looked into the loans. The informal memorandum, issued in February 2009, stated the long-term loan was under-collateralized.

“We looked at what the ag board had done in the past,” said Pat Davidson, the legislative auditor who wrote the report. “Did the collateral meet the 75 percent value of the loan they typically use as a standard?”

Davidson said the Matanuska Maid dairy had recently closed and auctioned off much of its equipment. Based on those sales, Davidson said the equipment used by Valley Dairy Inc. as collateral would not cover 75 percent of the $430,000.

Karen Olson, the CEO and CFO of Valley Dairy Inc., disagrees. She said the company has put more than $900,000 into improvements in the equipment at the creamery, and it is now worth double the amount the of the long-term loan.

Now, a year later after receiving the first two loans, Valley Dairy Inc. has received another. Olson said the creamery has paid off a third of the first short-term loan, and the new influx of $200,000 will allow it to pay off the remaining balance of the first short-term loan and bring them back up the upper limit, she said.

The money is going to pay the dairy producers, Olson said. This time of year, it is crucial for farmers to collect the payments they are due, she said. Now is when they start buying fertilizer and feed for the coming season. As part of a deal Valley Dairy Inc. made to receive a grant from the federal government, the creamery is mandated to pay the suppliers a “sustainable rate,” Olson said. This rate is $28 per hundred weight of milk, less their delivery and pick-up fees, she said. This is compared to the $12 to $14 per hundred weight price of milk as traded on the open commodities futures market.

Without the new loan, Olson said they would have been further behind on their payments to the producers. As the Matanuska Creamery is the only local outlet for these producers, these payments are of “primary importance” for the Mat-Su Valley dairy sector, Olson said.

Contact Todd L. Disher at todd.disher@frontiersman.com or 352-2252.