Group hopes to get meat plant out of the red

WASILLA — A group of local game processors has asked the state to consider privatizing the state-run Mount McKinley Meat and Sausage plant in Palmer.

The umbrella Denali Meat Company asked the Board of Agriculture and Conservation to consider privatizing the troubled industrial processing facility at the board’s Feb. 18 meeting in Palmer. Under their plan, the state would retain ownership, but private companies would bid for the opportunity to operate the plant on a lease. Without a one-year extension proposed by Gov. Bill Walker, the plant will close June 30. Denali Meat Company officials are asking that the extension be used as a transition period to move the plant to private ownership during the 2017 fiscal year, which begins July 1.

Denali Meat Company president Nate Burris is also the owner of Mat-Valley Meats, a game processing facility on the Palmer-Wasilla Highway. Privatization probably won’t be a lucrative endeavor, Burris said. The group has retained the services of former governor and Valley-based attorney Sean Parnell, according to company secretary Ernie Diamond.

“Nobody’s expecting to make a lot of money,” Burris said. “That place has lost money for all but one of its years.”

Nevertheless, the plant is a central component to the state’s agricultural industry, Burris said. He also pointed to factors that plant managers — Diamond was manager of McKinley Meats until 2011 — also say have hampered profitability. For example, the state-operated plant can’t market directly to grocery stores, because it uses inmate labor, which isn’t allowed to compete with private industry. Private operation would allow the plant to compete on more equitable terms, Denali Meat Company officials said. The plant also has untapped capacity, Burris said.

Transitions from public management to private operation in the Mat-Su borough have been fraught. In July 2007, the state-run Matanuska Maid creamery in downtown Palmer became the privately operated Matanuska Creamery. The operation collapsed within five years under a pile of unpaid state and federal agricultural loans. Dairy managers were convicted of fraud and sentenced to federal prison time in the wake of the closing.

The reasons behind the creamery’s failure are widely debated within the local agricultural community, Burris said. The Matanuska Creamery didn’t differentiate itself from a competitive market, and ended up competing with dairies in Oregon and Washington, according to Burris. By focusing on value-added products and marketing the meat as an Alaskan product, Denali Meat Company hopes to avoid the same fate, Buriss said.

“They (Matanuska Creamery) tried too hard to be in the commodity business,” he said.

The stakes are high for local ranchers and farmers. For example, local 4-H Club members raise about 100 animals for the Alaska State Fair in August, according to leader Chandra McCain. About three quarters of them are animals that require the facilities at the meat plant, including the plant’s USDA stamp, for processing. Were the plant to close, the club’s youth animal program would be crippled, McCain said. The plant processes the larger animals: cows, sheep, goats, and pigs, and also serves as a venue for the animal carcass evaluations, McCain said.

“It really doesn’t matter to us as long as it’s still functionable to the kids,” she said. “We don’t really care who operates it as long as the USDA portion is still there.”

Meat company officials also point to issues with food sustainability in Alaska, like cargo ship delays in January that caused empty store shelves in Anchorage and Fairbanks.

Diamond said he hopes the board’s long-term Alaska residency will ease concerns about how the plant would be managed under private ownership. Officials don’t take any transition lightly, he said.

“We’re trying to do something that’s positive, that’s going to expand and grow this market,” he said. “Everybody’s going to make more money and everybody’s going to succeed, if this works for us.”

Contact reporter Brian O’Connor at 352-2270, brian.oconnor@frontiersman.com, or on Twitter @reporterbriano.