By Jean Caspers-Simmet
simmet@agrinews.com
FLOYD, Iowa — Forty people filled the meeting room in Dugans Restaurant in Floyd Saturday to get answers about the VeraSun bankruptcy.
VeraSun’s Charles City plant is just down the road, and many at the meeting have corn contracts with the ethanol producer.
"The meeting was an effort to get some straight talk to inform producers about what we know now," said Rep. Mark Kuhn, a Charles City farmer whose phone has been ringing off the hook. "There has been so much inaccurate information."
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Kuhn met in Des Moines last week with the Iowa Attorney General’s staff and Iowa Department of Agriculture and Land Stewardship officials. Because he sells corn to VeraSun, he has been in almost daily contact with the plant.
"For the past four days, there has been a different grain procurement policy each day," Kuhn said. "On Friday at Charles City, VeraSun said it would honor October and November contracts at face value. We’ll see what happens Monday."
The Charles City plant quit offering deferred credit sales, which aren’t covered by Iowa Grain Indemnity Fund.
VeraSun Energy Corp., the nation’s second-largest ethanol producer, filed Chapter 11 bankruptcy Oct. 31 in Delaware. It has 17 plants including five in Iowa and two in Minnesota.
Iowa has 4,780 unsecured creditors listed in the VeraSun bankruptcy. Kuhn is one of them.
"We’re at the bottom of the pile," he said.
Kuhn said it is in the farmers’ best interest to keep VeraSun in Chapter 11 where it continues to operate while reorganizing its business. Chapter 7 bankruptcy would liquidate assets to pay creditors.
Iowa’s Grain Indemnity Fund fund will pay farmers 90 percent of their loss on grain up to $150,000 per claimant, Kuhn said. Credit sale contracts aren’t covered. The fund covers forward contracts. If farmers are forced to sell grain for less than they contracted, the fund will cover 90 percent of the difference between what the producer received and what the contract called for.
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Created in the 1980s, the fund has a statutory cap of $6 million, but interest has boosted the fund to $8 million. If the fund falls below $3 million, a mandatory assessment takes effect.
The Legislature will look at shoring up the Indemnity Fund this session, Kuhn said. A legislative interim committee will discuss the VeraSun bankruptcy Nov. 20 in Des Moines. The Iowa Grain Indemnity Fund board will also meet.
Pam Johnson, a member of the Iowa Corn Promotion Board and a Floyd farmer, said the focus needs to be on keeping VeraSun plants operating. She and her husband went through a similar situation when the Orchard Elevator declared bankruptcy in the 1990s.
"You are so angry that your first impulse is for retribution," Johnson said. "You have to think about the big picture. Like Mark said, it’s in our best interest to keep VeraSun open. They use 39 million bushels of corn. Do we want that dumped on the market? We have to look at how to not turn a bad situation into a worse one."
