Monday, April 6, 2015

Receiver finds mess at Chinese plant

Receiver BDO Canada Ltd. has found a mess at the plant that Chinese built in Scarborough to make infant formula to export to China.

The two businesses – Canadian Dairy Manufacturing Inc. and Maple Dairy Inc. – are in bankruptcy.

The office portion of the business has flooded and frozen after pipes burst. The plant has been without natural gas and heat since 2010, but the manufacturing-area water pipes had been drained, so it was not flooded.

A partially-finished dryer stands behind one of four buildings with assembly stalled by the Toronto building inspector who has ruled it’s not in compliance, apparently because the footprint is three feet too large.

Dairy Farmers of Ontario apparently invested $500,000 in the venture that never got off the ground, partly because of the maze of regulations and politics surrounding supply management.

When the venture was first announced, it seemed an ideal fit for the Ontario dairy industry because it would be a high-paying customer for surplus skim milk powder.

Because World Trade Organization rules keep Canada out of lucrative export markets, large volumes of skim milk powder end up as feed for calves at prices far lower than markets for human consumption.

The World Trade Organization has ruled that Canadian dairy farmers are subsidized through their supply-management system, therefore they can’t export dairy products in unfair competition with other countries’ dairy farmers who are not subsidized.

The Chinese venture was to be a combination of four investors in the Toronto area and four in China with marketing and distribution connections, including ownership of a major supermarket chain.

The Toronto-area investors are bogged down in disputes, including a lawsuit claiming $20 million.