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Renville County considers meat processor's request to forgive its tax penalties

OLIVIA -- Cargill is posting record profits, but farther down the food chain the meat processing industry is cutting its profit margins very thin, according to representatives of North Star Beef in Buffalo Lake.

They asked the Renville County Board of Commissioners on Tuesday to forgive penalties and interest assessed for non-payment of taxes.

North Star Beef reopened the Minnesota Beef Industries plant in Buffalo Lake in September, bringing 185 to 190 jobs back to the county in the process, according to William Gilger, president of North Star Beef. The plant had been closed for 19 months.

The company is now in the process of finalizing a possible financing package with the United States Department of Agriculture's Rural Development.

As part of the application, the company is responsible for paying taxes owed by Minnesota Beef Industries for 2006 and 2007 totaling more than $176,000.

North Star Beef is committed to paying the taxes, along with taxes payable for 2008 that will total more than $80,436, according to Gilger. The company is asking the county to forgive penalties and interest on the two years that were not paid by Minnesota Beef Industries.

The penalties for the two years total $42,400.04 and the interest totals $24,994.79, for a grand total of $67,394.83 owed, according to information provided by Larry Jacobs, county auditor/treasurer.

Minnesota Beef was among 37 plants in the U.S. to close after what Gilger called a "perfect storm'' struck the processing industry in early 2006. Meat prices plunged from $1.03 to 72 cents a pound due to the mad cow scare and the closing of overseas export markets, and a drought that forced many Texas ranchers to cull their herds. At the same time, the U.S. banned the import of livestock from Canada, blocking an important supply of low-cost meat for the plant in Buffalo Lake.

The company had invested more than $9 million upgrading the plant before the beef industry was sent into a tailspin.

It remains difficult for meat processors, according to the North Star representatives. The high price of corn has pushed livestock prices upward, but there is excess production capacity in the meat processing industry. That keeps profit margins thin for smaller processors who must compete with large-volume processors such as Tyson and Cargill, explained Gordon Reisinger of North Star Beef.

The Buffalo Lake company's strategy has been to avoid head-on competition in the commodities markets by focusing on premium market opportunities provided by ritual slaughter. It produces kosher and halal meats for East Coast markets, according to Gilger.

The company has a weekly payroll of $100,000, or more than $5 million annually, according to Reisinger. He and Gilger told the commissioners that its employees live throughout Renville County and beyond. It provides a bus service for Willmar area employees.

The commissioners will discuss and may act on the request for forgiveness of the tax penalties and interest April 22.