By Jean Caspers-Simmet
simmet@agrinews.com
CHARLES CITY, Iowa — Charles City farmer Erwin Johnson contracted part of his 2008 corn crop for delivery in 2009 for a price considerably higher than what the market is offering to the VeraSun plant near his farm.
He doesn’t know if VeraSun will honor his contract. Right now it’s a waiting game while the U.S. Bankruptcy Court in Delaware decides what actions the company can take as it tries to get back on its feet.
"We’re out here in limbo," Johnson said. "We do know that the bankruptcy court judge has told VeraSun that they can pay their employees and buy corn, but what happens to the outstanding contracts?"
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When corn prices soared near $8 last summer on the Chicago Board of Trade it seemed like a good decision to take advantage of contracts offered by VeraSun to deliver corn in the coming year.
"Will they honor the contracts?" Johnson asked. "It’s in their interest to buy corn as cheaply as they can. Only time will tell what will happen."
What concerns Johnson is that current cash price is $3.50 and he may be forced to accept the market price for his contracts.
"Say a producer contracted 30,000 bushels at $6.50, if he’s forced to sell at $3.50, that’s $90,000," Johnson said. "That’s not chicken feed. We’re talking about significant dollars to a lot of producers."
Johnson said he wants VeraSun to be successful. Many area people bought shares in the company. The plant has been positive for corn prices and jobs.
Rep. Mark Kuhn, a Charles City farmer, said he sold corn to VeraSun and deferred payment until 2009. He said he and others in his situation aren’t sure where they stand.
Kuhn thinks it may be time to look at whether the Iowa Grain Indemnity Fund needs to be changed to provide more protection for farmers.
Pam Johnson, who farms with her husband, Maurice, and sons near Floyd, said they contracted corn ahead with VeraSun. A member of the Iowa Corn Promotion Board, she isn’t related to Erwin Johnson.
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She said that they try to maximize the income on their farm and sell to the right markets that bring the most return. Price-later contracts do bring risk with them.
"You try and do the best job you can at marketing grain and you hope your markets are solvent," Johnson said. "I hope that whatever happens here all the people who contracted grain are able to be paid and contracts fulfilled."
Johnson said she wishes the best for VeraSun.
"For farmers, the best thing is to have competition in the market place," she said. "To have a close market like that is really good for the community. The ethanol industry is good not only for corn growers but for rural Iowa. This is a bump in the road. There are challenges in every industry that is growing that rapidly. The global credit crunch is complicating everyone’s business."
