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Farmers seek fairness in VeraSun bankruptcy

The money that farmers thought they would get when they forward contracted for the sale of corn to VeraSun Energy may not be there.

But several groups, represented by farmers who sold to the now bankrupt VeraSun, are seeking fair treatment from a Delaware federal bankruptcy court that is overseeing the Sioux Falls, South Dakota-based company's Chapter 11 case.

One those farmers, past National Corn Growers Association president Ron Litterer of Greene, Iowa, has filed an objection with the court over how VeraSun wants to treat contracts with farmers.

According to a statement from NCGA, VeraSun wants the court to allow it to wait until 10 days before a contracted delivery date to notify growers if the company is rejecting the contract.

"This would essentially leave corn suppliers in a state of limbo while VeraSun is free to determine the market price for corn before deciding whether to accept deliveries under a contract or summarily reject the contract," NCGA said.

Litterer told Agriculture Online last week that he believes that approach is unfair to growers, especially those who may have contracts for delivery to VeraSun ethanol plants next summer.

Litterer said he hopes the court will approve "a reasonable approach that will allow producers some flexibility going forward."

In Litterer's own case, he had contracted to sell to VeraSun at $6.51 a bushel.

"Fortunately, I've got a positive and a negative. I do have 20,000 bushels sold to VeraSun for March delivery, but thank goodness that's all," Litterer said.

He fears that some farmers, especially those close to VeraSun plants, may have sold most of their crop to the company.

Litterer doesn't expect to be paid the $6.51 price.

Depending on corn prices going forward, "we could maybe gain part of it back, but it’s still going to be a sizable hit."

Individual farmers affiliated with other groups have also filed objections to VeraSun's bankruptcy plans.

Mark Kuhn, a Charles City, Iowa corn farmer and an American Corn Growers Association (ACGA) board member, said last week that he has plans to file an objection, representing farmers in Iowa and southern Minnesota.

Litterer said he hopes that all of the groups can work together to represent corn farmer interests in the case.

In a statement released last week, VeraSun said it has quit receiving corn at some of its plants.

"VeraSun Energy values the relationships with our corn suppliers and recognizes their vital role to our business. We continue to work with suppliers while we pursue long-term financing," the company statement said. "The company has paid or will pay for substantially all pre-petition corn delivered after October 11, 2008, and post-petition corn delivered after October 31, 2008. The U.S. Bankruptcy Code precludes payment for goods delivered before October 11, 2008. This has negatively impacted approximately 10 of VeraSun's corn producers with balances totaling approximately $360,000 for less than 100,000 bushels. VeraSun has paid more than $9 million in November for corn delivered prior to October 31, 2008."

"Unfortunately, the Company will need to reject some corn contracts for delivery through Dec. 31, 2008 at our Janesville and Welcome, Minnesota, facilities due to the delayed startups. Other contracts may need to be rejected or renegotiated as we continue to work through them on an individual basis," VeraSun said. "The company has also temporarily ceased receiving corn and processing at certain facilities while we seek to secure additional financing. VeraSun appreciates the loyalty of our corn suppliers and their willingness to continue to work with us through the reorganization process."

Litterer said that going forward, farmers will be much more cautious about who they sell corn to and the effects of VeraSun's bankruptcy could be wide reaching.

"VeraSun's a big player in the ethanol industry, so it's going to haves some impact," he told Agriculture Online. "In the end, this is not a good thing for producers. We're just trying to make the best possible outcome for producers."

The money that farmers thought they would get when they forward contracted for the sale of corn to VeraSun Energy may not be there.

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