The Iowa Corn Growers Association (ICGA), National Corn Growers Association (NCGA) and members of state corn grower associations from several other states helped bring about key developments at the VeraSun bankruptcy hearings that were held December 2. The hearings took place in bankruptcy court in the state of Delaware, which is where VeraSun is chartered.
The state corn grower groups together filed a motion to challenge bankruptcy provisions in the VeraSun case that threatens future corn sales contracts. Ron Litterer, a farmer from Greene, Iowa, who is past ICGA president and currently serves as NCGA chairman, says the states working together are serving as a voice for corn growers and an advocate for farmer interests.
Specific lawyer assigned to grower issues
The first steps in this process took place with the formation of the first and only corn grower 'ad hoc' committee recognized by the bankruptcy court, he says. At the hearing, the bankruptcy judge welcomed the corn grower committee and told lawyers for VeraSun to make sure phone calls from corn growers and their lawyers are answered. In addition, a specific lawyer from VeraSun was assigned to corn grower issues.
"The Iowa Corn Growers Association and the other corn states accomplished several key things this week regarding this case," says Gary Edwards, a farmer from Anamosa who is the current ICGA president. "We are making great strides to create open communication between corn growers, VeraSun and the court. The fact that corn growers from many states have banded together really impressed the court and other parties in the case."
Key developments in VeraSun case
VeraSun has 16 ethanol plants in eight states, and five of the plants are in Iowa. The company declared Chapter 11 bankruptcy October 31 and is continuing to operate while trying to reorganize its finances and get back on its feet. At the bankruptcy hearing last week, several key developments took place:
* The group, led by NCGA, successfully filed an objection to the type of contract that has a 10-day notice from VeraSun. VeraSun wants the court to give the company permission to void corn contracts on a 10-day notice. In otherwords, farmers would have to hold their corn until VeraSun decided to either accept or reject the contract. VeraSun would give farmers a notice of its decision 10 days prior to when the corn is to be delivered.
For example, say a farmer has a contract to sell VeraSun corn on March 1. VeraSun could tell the farmer on February 20 that it is rejecting the contract. Then the farmer would be free to sell the corn elsewhere, but may have already passed up a higher price during the time period prior to February 20. Also, if the contract is for $6 corn and the market price is only $4 on March 1, VeraSun could reject the contract and only offer to pay $4 or whatever the market is at the time.
Allowing VeraSun to do this would tie up grain contracted to VeraSun, but then allow VeraSun to nullify the contract. Corn farmers in the bankruptcy court on December 2 argued that VeraSun was holding growers hostage because farmers were bound by the contract and thus couldn't market their grain elsewhere.
Process approved to give farmers some leeway
* The bankruptcy court approved a process for notice on certain forward contracts. However, no specific deadline has been outlined at this time. Individual growers and their legal counsel are still encouraged to work with their local VeraSun ethanol plant on their specific contract details.
Statements presented at the hearing, both orally and in written form, stressed the complex issues facing farmers in terms of contracts. In response, the court ordered VeraSun to carefully consider the unique circumstances of each particular group of farmers and their unique situations. This included the differences between different states with VeraSun plant locations.
Ad hoc committee represents all corn growers
* An ad hoc committee representing the interests of all corn growers affected by the bankruptcy was announced. This committee was subsequently acknowledged by the court and by VeraSun.
The committee, with representation from NCGA, and five state grower associations, will serve in an advisory role between the court and corn growers who are affected or who will be affected. The committee will be able to give advice and council on options, rulings or alternatives. This ad hoc committee, VeraSun, and the court are in discussions on an acceptable timetable for notification of assumption or rejection of contracts throughout the entire case.
"The U.S. bankruptcy court has given VeraSun the go-ahead to cancel forward corn contracts with 10-days notice," sums up Joe Peiffer, an attorney from Cedar Rapids, who testified at the bankruptcy court hearing. He is representing about 80 farmers from Iowa and Minnesota in the case. He notes that "VeraSun did agree in court to the procedure that will allow farmers to submit contracts to VeraSun's bankruptcy law firm in Chicago, which will notify farmers whether the contract will be accepted or rejected."
Peiffer adds, "This court decision on December 2 isn't everything we wanted. But it's better than before." Peiffer says word will be distributed in coming days about the procedure for how farmers can ask VeraSun's attorneys for the review of their contracts.
Court proceedings may move slowly
VeraSun has said that it has about 7,800 contracts in the Corn Belt and about 5,760 of them are in Iowa.
"The proceedings of the bankruptcy court may move slowly, but we now have a great start and we have respect for us building from the court," sums up Edwards. "By banding the corn grower groups together, we made sure that individual producer concerns and complexities will be heard by the system. There are a number of additional crucial issues for corn growers that may come up in the future as this bankruptcy case moves forward and the ad hoc committee recognized by the court will continue to play an important role."
"ICGA directors and staff are monitoring the VeraSun situation, as it develops in Delaware and here in Iowa, meeting with key officials, and taking steps to keep ICGA members informed of the latest developments," says Edwards.
Potentially thousands of corn growers from Indiana, Iowa, Michigan, Minnesota, Nebraska, North Dakota, Ohio, South Dakota and other states could be affected by the bankruptcy proceedings.