ConAgra Mills agrees to supply flour to MGPI

by Josh Sosland
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ATCHISON, KAS. — MGP Ingredients Inc. and ConAgra Mills Inc. on Oct. 20 signed a non-binding letter of intent under which ConAgra would supply MGP with wheat flour to be used for the production of protein and starch ingredients.

Tim Newkirk, president and chief executive officer of MGP Ingredients said the supply agreement could become effective within a month, pending the outcome of further negotiations.

In connection with the agreement, MGPI has halted production at its Atchison flour mill, effective immediately.

"Unfortunately, this situation necessitates an adjustment in our workforce numbers," Mr. Newkirk said. "This adjustment involves temporary layoffs affecting 32 positions. Simultaneously, we are offering early retirements to an additional 12 employees."

Mr. Newkirk described the decision to close the mill as "difficult and painful" from a personnel standpoint.

"However, it is a (decision) we find necessary for the good of the business and our overall workforce as well as in the best interest of our stockholders," he said. "This potential change will also enable us to more effectively serve our customers by concentrating on those areas of our operations that can generate greater value for them."

With 20,000 cwts of daily milling capacity, the Atchison mill of MGP Ingredients is the 13th largest mill in the United States (three U.S. mills have 20,000 cwts of daily capacity).

MGPI acquired the mill from The Pillsbury Co. in 1987. The mill supplies feedstock to MGPI protein and starch operations in Atchison and Pekin, Ill.

For many years, MGP was able to operate the mill efficiently and consistently, Mr. Newkirk said.

"In more recent years, however, utilization of the mill's capacity has been extremely erratic," he said. "This is due to a number of factors, including changing market dynamics, changes in our protein and starch product mix requirements, and volatile wheat prices, which reached record highs during our 2008 fiscal year. Very simply put, wheat milling as a component of our overall ingredient solutions value chain is not a step in which MGPI can uniquely create value. As such, we are exploring alternative methods for obtaining the raw material for our ingredient solutions products."

With the closing of the Atchison mill, Kansas would remain the nation’s largest milling state with total daily capacity of 116,700 cwts, based on the 2008 Grain & Milling Annual published by Sosland Publishing Co. Kansas would be only slightly larger than California, at 106,600 cwts, and Minnesota, at 101,430. MBN

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