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'Pink slime' controversy leads beef producer to bankruptcy

It appears that public outcry over "pink slime," or the use of boneless lean beef trimmings in ground beef products, has led to national ground beef producer AFA Foods Inc. filing for bankruptcy. With these recent financial struggles, it's anticipated that lay-offs will also end up affecting hundreds of employees across the country who work for the company.

When looking at the controversy, the beef trimmings are included in some of the company's products. The trimmings are beef scraps that contain no fat. However, for bacteria protection, these scraps are treated with ammonium hydroxide, which in turns gives them a pinkish color and has resulted in critics referring to them as "pink slime."

Over the past several weeks there has been much publicity over the use of boneless lean beef trimmings, known in the industry as BLBT. Celebrity chef Jamie Oliver has come out saying these trimmings are unhealthy and unappealing, and beef containing BLBT has also since been pulled from some fast-food restaurants, school cafeterias and supermarkets.

This backlash against the products, especially at a time when the industry counts on more people buying beef for grilling season, has had a real negative financial impact on AFA Foods Inc.

However, the interim chief executive for the company said the controversy is "unfounded." The U.S. Department of Agriculture has also approved the use of these beef trimmings for at least the last 20 years.

According to the bankruptcy filing, the company has $197.3 million in debts and $219.6 million in assets. The decision to file for bankruptcy was made after the company was unable to pay vendors last week. In order to be able to pay those vendors, AFA Foods Inc. needed a loan, but banks would not provide the necessary loan.

Source: Los Angeles Times, "Ground beef processor files for bankruptcy, blames 'pink slime,'" Marc Lifsher and Tiffany Hsu, April 2, 2012

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