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Ruling Allows VeraSun To Reject Corn Contracts
By Lisa Hare
lisa.hare@yankton.net
WILMINGTON, Delaware — A U.S. Bankruptcy Court this week issued a ruling that will allow VeraSun Energy Corporation to reject any contracts that are “economically disadvantageous” to VeraSun — including corn growers’ contracts.
Legal counsel for an ad hoc advisory committee formed by the National Corn Growers Association (NCGA), state affiliated organizations, and others participated in the hearing.
The ruling came over the objections of corn farmers and lenders who were concerned the ruling would destroy area farmer’s trust in the Sioux Falls-based company.
“We are happy that the court listened to corn growers’ views,” said NCGA Chairman Ron Litterer, a corn grower from Greene, Iowa. “It was doubtful that we could influence the courts to require VeraSun to pay the contracted price for our corn. We believe we did influence other issues of concern to growers.”
NCGA helped form the advisory committee in November to make certain that the views, and interests of corn growers in the VeraSun case were represented.
Keith Bolin, president of the American Corn Growers Association (ACGA), and a corn and hog farmer from Bureau County, Ill., was also present at Tuesday’s proceedings.
“This ruling leaves a lot of farm families in limbo, uncertain what their contracted bushels are worth and when they can actually sell them,” Bolin said.
At the hearing, U.S. Bankruptcy Judge Brendan Shannon approved a process that would allow VeraSun 10 business days prior to delivery of corn contracted with farmers to cancel those purchase contracts.
“The VeraSun bankruptcy proceedings on the East Coast are having serious reverberations throughout the Midwestern Corn Belt,” Bolin added.
Also attending was the VeraSun Corn Suppliers spokesman Mark Kuhn, a state representative from Charles City, Iowa, a corn farmer and an ACGA board member. Kuhn and others will be putting together an individual test case in bankruptcy court in an effort to determine the status of those long-term contracts because, “farmers are still being held hostage.”
VeraSun Corn Suppliers is a group of 124 corn producers, and the number is growing from Iowa, Michigan, Minnesota, Nebraska, North Dakota and South Dakota. Led by Kuhn, the group filed an objection in the U.S. Bankruptcy Court for the District of Delaware on Nov. 21. That objection was denied by the court in Tuesday’s proceedings.
VeraSun announced that it will cancel contracts for seven of its plants, which were described as being on “hot idle” — a condition in which they are capable of resuming production on short notice, but not currently producing any ethanol, due to having no line of credit available to pay for the corn they have already contracted to buy. The seven plants will continue on “hot idle” status at least through Jan. 15.
VeraSun has built the Janesville and Welcome plants in Minnesota, but neither has produced a gallon of ethanol. However, VeraSun laid the groundwork for starting production by contracting with local farmers for millions of bushels of corn.
“We will continue to advocate for the interests of all corn suppliers and play a role to help make the best of a bad situation,” Litterer said. “As providers of corn to VeraSun, corn growers want fair payment under fair terms for their corn, as well as a positive conclusion that allows VeraSun to stay viable as a long-term customer for our corn. We believe this is in everyone’s best interests,” he added.
“There were only four real farmers and corn producers in the (court) room,” Bolin said. He added that VeraSun now has a captive supply of grain all the way out to 2011 with no guarantee of price.
“Their bankruptcy was caused by the company speculating in the grain markets, not the weakness in the ethanol markets,” he said, adding that the impact would be felt across the whole sector. “These folks did serious damage to the ethanol industry,” he said. “If left unchecked, this debacle will erode the integrity of the markets and the rights of farmers.”
“The law too often provides no refuge for hard working people who play by the rules and do business in good faith,” said one corn grower present at the proceedings. “Obviously there are massive holes in the farm safety net still to be fixed.”
He added that if the court’s ruling stands, a negative impact on all corn producers across America would be felt. “If VeraSun is allowed to reject corn contracts and future deliveries, this decision will create undue concern and (effect) our hopes in the future of ethanol.”
Legal counsel for an ad hoc advisory committee formed by the National Corn Growers Association (NCGA), state affiliated organizations, and others participated in the hearing.
The ruling came over the objections of corn farmers and lenders who were concerned the ruling would destroy area farmer’s trust in the Sioux Falls-based company.
“We are happy that the court listened to corn growers’ views,” said NCGA Chairman Ron Litterer, a corn grower from Greene, Iowa. “It was doubtful that we could influence the courts to require VeraSun to pay the contracted price for our corn. We believe we did influence other issues of concern to growers.”
NCGA helped form the advisory committee in November to make certain that the views, and interests of corn growers in the VeraSun case were represented.
Keith Bolin, president of the American Corn Growers Association (ACGA), and a corn and hog farmer from Bureau County, Ill., was also present at Tuesday’s proceedings.
“This ruling leaves a lot of farm families in limbo, uncertain what their contracted bushels are worth and when they can actually sell them,” Bolin said.
At the hearing, U.S. Bankruptcy Judge Brendan Shannon approved a process that would allow VeraSun 10 business days prior to delivery of corn contracted with farmers to cancel those purchase contracts.
“The VeraSun bankruptcy proceedings on the East Coast are having serious reverberations throughout the Midwestern Corn Belt,” Bolin added.
Also attending was the VeraSun Corn Suppliers spokesman Mark Kuhn, a state representative from Charles City, Iowa, a corn farmer and an ACGA board member. Kuhn and others will be putting together an individual test case in bankruptcy court in an effort to determine the status of those long-term contracts because, “farmers are still being held hostage.”
VeraSun Corn Suppliers is a group of 124 corn producers, and the number is growing from Iowa, Michigan, Minnesota, Nebraska, North Dakota and South Dakota. Led by Kuhn, the group filed an objection in the U.S. Bankruptcy Court for the District of Delaware on Nov. 21. That objection was denied by the court in Tuesday’s proceedings.
VeraSun announced that it will cancel contracts for seven of its plants, which were described as being on “hot idle” — a condition in which they are capable of resuming production on short notice, but not currently producing any ethanol, due to having no line of credit available to pay for the corn they have already contracted to buy. The seven plants will continue on “hot idle” status at least through Jan. 15.
VeraSun has built the Janesville and Welcome plants in Minnesota, but neither has produced a gallon of ethanol. However, VeraSun laid the groundwork for starting production by contracting with local farmers for millions of bushels of corn.
“We will continue to advocate for the interests of all corn suppliers and play a role to help make the best of a bad situation,” Litterer said. “As providers of corn to VeraSun, corn growers want fair payment under fair terms for their corn, as well as a positive conclusion that allows VeraSun to stay viable as a long-term customer for our corn. We believe this is in everyone’s best interests,” he added.
“There were only four real farmers and corn producers in the (court) room,” Bolin said. He added that VeraSun now has a captive supply of grain all the way out to 2011 with no guarantee of price.
“Their bankruptcy was caused by the company speculating in the grain markets, not the weakness in the ethanol markets,” he said, adding that the impact would be felt across the whole sector. “These folks did serious damage to the ethanol industry,” he said. “If left unchecked, this debacle will erode the integrity of the markets and the rights of farmers.”
“The law too often provides no refuge for hard working people who play by the rules and do business in good faith,” said one corn grower present at the proceedings. “Obviously there are massive holes in the farm safety net still to be fixed.”
He added that if the court’s ruling stands, a negative impact on all corn producers across America would be felt. “If VeraSun is allowed to reject corn contracts and future deliveries, this decision will create undue concern and (effect) our hopes in the future of ethanol.”
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