Valencia peanut growers in Texas and New Mexico may be scrambling for a new buyer after officials at Sunland peanut butter plant in Portales, New Mexico, announced they have filed for Chapter 7 bankruptcy over troubling financial and liquidity challenges.

If approved by a U.S. bankruptcy court, the plant, located in Portales in eastern New Mexico, must permanently close and liquidate all assets according to terms of Chapter 7 rules of the U.S. Bankruptcy code.

Company officials cite ongoing financial difficulties as the primary reason for the filing. The company was required by the Federal Drug administration (FDA) last year to shutter the plant after peanut butter processed at the plant were linked to a nationwide salmonella outbreak involving 41 cases in 20 states.

FDA inspectors cited the company after a month-long investigation, saying salmonella had been discovered in 28 locations throughout the plant and in several nut butter samples. Sunland, Inc. is the nation's largest producer of organic peanut butter. They produced organic peanut butter under different labels for a number of retailers nationwide including Costco, Kroger Foods and Trader Joe's, as well as producing organic peanut butter under their own label.

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In late December, Sunland announced that the food facility registration for its Portales, New Mexico, location had been reinstated. That followed an agreement reached between federal inspectors and plant officials that called for an independent, third party inspection of the facility to determine if the problems discovered from previous inspections had been corrected.

In January, Sunland put most of the employees laid off following the recall last year back to work and soon thereafter began making payment arrangements with New Mexico and Texas peanut growers who were owed money for peanuts sold to the company but not yet processed when FDA shuttered the plant.

Officials say the eight-month closure that began last year was more than the company could financially overcome and the decision to file for Bankruptcy came as a last resort.

Closing may create problems for peanut growers

Texas grower Brent Nelson said earlier this year the company had been good to growers by making partial payments initially following the shut down last year and that company representatives announced plans for follow up payments. Nelson said the closing of the plant last year caught all parties by surprise and created many hardships not only for the plant but for growers as well.

“Our peanut harvest last year was one of the best we have had in recent times. This was true for many growers across the region. We depended on the Portales plant and don’t have a lot of options for selling our crop outside of Sunland,” he told Farm Press earlier this year.

Sunland limited peanut purchases to high-grade Valencia varieties because of their natural sweetness and long maintained a working relationship with regional growers, some of whom were quick to defend the company after FDA inspections last year.

Some growers expressed concern that the FDA's punitive action that closed the plant last year may have been tied to the government's intent to send a message to other food processors.

"I think maybe the FDA wanted to set an example because of the string of salmonella outbreaks last year and the year before, so Sunland may have been the one the inspectors finally targeted to make that message clear," Nelson said.

Now that the plant faces permanent closure, peanut growers in the region will need to scramble to find another buyer, a development that may further hurt growers who were adversely affected by Sunland's closure last year.

The plant was one of the largest employers in Roosevelt County. As a result, the Portales City Council authorized $150,000 in economic development funds for Sunland last year to help cover some of the costs incurred as a result of its sanitation plan, according to Portales City Manager Tom Howell.

“The purpose of that money was to help them get through requirements of the FDA,” Howell said after the funds were awarded to the company last year.

Howell and company officials were not available for comment on this latest development.

Also of interest on Southwest Farm Press:

Texas farmers are unintentional victims of FDA closure of Sunland

Peanut plant puts workers back to work, pays some farmers

Bad news for New Mexico farming town