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Sunland Organic Peanut Butter Plant to be Auctioned on Thursday

What began 18 months ago with the recall of organic peanut butter involved in a Salmonella outbreak will end later this week when the shuttered Sunland Inc. processing plant goes on the auction block.

In September 2012, when Trader Joe’s recalled its Creamy Salted Valencia Peanut Butter, manufactured in Portales, NM, by Sunland, the processing plant was the largest producer of organic peanut butter in the United States.

The auction — ordered by the U.S. Bankruptcy Court — will likely determine the future for added value nut processing in the Valencia peanut-growing area along the New Mexico-Texas border.

An outbreak of Salmonella Bredeney that sickened 42 people in 20 states also brought about Sunland’s demise, putting it in Chapter 7 liquidation proceedings where its assets, estimated at $50 million, are being used to satisfy as many creditors as possible.

The court opted to sort out the competing offers it already has received for the facility with the auction sale. Earlier it had appeared all but certain that California-based Ready Roast Nut Company’s $18.5-million offer would be accepted. Clarke Coll, the bankruptcy trustee, endorsed Ready Roast offer.

Then Hampton Farms, a North Carolina-based peanut roaster that makes peanut butter in North Carolina and Virginia, made a competing undisclosed bid to purchase Sunland’s plant and property. The amount of that bid was not disclosed before the court decided to settle the issue at auction.

Attorneys for Hampton Farms said the Ready Roast offer was $11.5 million for the plant and $7 million for the inventory, an amount that could be reduced if the inventory estimate is off. Sunland’s inventory consists of raw peanuts and some processed peanut butter.

Auction bidders are required to post a $500,000 bond, and bidding will be in $50,000 increments. Bankruptcy Judge David Thuma has scheduled a hearing on Friday for the purpose of accepting or rejecting the winning bid.

Watching with interest how the auction comes out will be Sunland’s largest secured creditors: CoBank of Denver, Production Credit Association of Southern New Mexico, and Costco Wholesale.

Sunland holds the distinction of being the first food company to have its registration revoked under the Food Safety Modernization Act, a move that forced its closure for several weeks after the outbreak.

After Sunland resumed operations in 2013 with $20 million in new financing from Costco, it seemed for a while that the Portales company would come back. But then it shocked the local community by closing down permanently and filing for bankruptcy last Oct. 9.

While it started out with that single recall from Trader Joe’s, Sunland had, by Oct. 12, 2012, recalled more than 300 separate products, including raw and roasted shelled and in-shell peanuts.

State labs in New Jersey, Virginia and Washington state isolated the Salmonella Bredeney strain. All found the pathogen in samples of Trader Joe’s Creamy Peanut Butter made with Sea Salt, which were collected from jars in the homes of those who became ill.

In the month after the recall and outbreak, FDA personnel inspected the Sunland facility and found conditions were ripe for peanut butter contamination, with Salmonella found in 28 environmental samples taken inside the plant. FDA also found Salmonella in raw peanuts and peanut butter samples from product inside the facility.

© Food Safety News
  • Gene

    “Attorneys for Hampton Farms said the Ready Roast offer was $11.5 million for the plant and $7 million for the inventory, an amount that could be reduced if the inventory estimate is off.”

    Why would they want likely contaminated product?
    “FDA personnel inspected the Sunland facility and found conditions were ripe for peanut butter contamination, with Salmonella found in 28 environmental samples taken inside the plant. FDA also found Salmonella in raw peanuts and peanut butter samples from product inside the facility.”

    • BTom

      The inventory they refer to is mostly farmer stock peanuts, which are still in the shell and haven’t been through the shelling and roasting process. Any contaminated product would have been destroyed by now. Before they filed bankruptcy, Sunland made extensive upgrades to the plant to correct the problems. A few more changes and a good cleaning would probably solve the problem.

  • KennethKendrick

    I had said from the start of this, it would end up bankrupt, sadly I was correct. I do feel for the employees who worked hard to save the Company, but basic common sense could have stopped this before it started. A company that cares about safety can clean it up and get it going, but it will take some work, but there is a big market for this type of organic peanut and plenty of farmers to sell them. They should have been shut down years ago (when Peanut Corp was investigated, and had bought from them) http://www.kendrickfortexas.com

  • svfoxhotmail

    wouldn’t you throw out any inventory in suspicion of contamination
    sam
    http://www.unscramblewords.com

  • JE Brown

    Probably they thought people would buy it but I don’t think so