VeraSun Energy, based in Sioux Falls, S.D., filed Chapter 11 bankruptcy last week. The move, which provides protection from creditors and time for the company to reorganize financially, follows the company’s announcement in September of losses exceeding $100 million for the third quarter.
Farmers who sell corn to VeraSun’s plant in Charles City — one of five in the state and 16 nationwide — wonder if the company will honor forward contracts signed prior to the financial crisis.
According to a statement, the company plans to resume normal operations. VeraSun won’t reduce purchases of raw materials, and farmers and other suppliers will still be paid in full after the bankruptcy filing date, as required by law.
“Our plants that have been in operation, all five, are going to continue in operation, and we’re moving forward with purchasing supplies and corn at those facilities,” Verasun spokesman Mike Lockrem said Wednesday.
The company statement did not mention corn purchase agreements made prior to the filing.
“I hope I get my money,” said Ron Stewart of rural Floyd. “It depends on the bankruptcy court.”
Earlier this year Stewart agreed to deliver 60,000 bushels he’s harvesting to VeraSun in Charles City. Delivery dates are slated for January, March and July 2009.
In order to lock in part of the 39 million bushels of corn needed annually to operate the plant, VeraSun agreed to pay Stewart around $6 per bushel.
If the contracts are voided, he keeps his corn, but now the crop is worth considerably less compared to Tuesday’s prices. Cash corn at the East Central Iowa Cooperative in Hudson was $3.79 per bushel and March corn on the Chicago Board of Trade was $4.31.
The prospect of losing more than $100,000 isn’t a comforting thought, Stewart said.
“That’s what I’m faced with if they can’t honor the contracts,” he said. “I’ll still make some, but I thought I would have all this extra money.”
Erwin Johnson of rural Charles City is in a similar situation. Prior to the bankruptcy filing, he expected to haul 30 percent to 40 percent of his 2009 corn crop to the ethanol distillery a few miles away and be paid “considerably more” than current prices. Now that’s uncertain, along with future income potential.
Johnson also is worried about money he invested in the publicly-owned company. He said many friends and acquaintances also purchased stock in VeraSun after the Charles City plant was built and the company was profitable.
“I know a lot of people in Charles City believed in this company,” he said. “It’s a big deal — a very big negative.”
VeraSun produces 550 million gallons of ethanol a year in Iowa and is scheduled to make 1.64 billion gallons nationwide. The company blamed third-quarter losses on a dramatic spike in corn costs — its chief input — and historically unfavorable margins.
Corn neared $8 per bushel this summer on the Chicago Board of Trade when buyers feared big losses because of widespread flooding.
During the same time, high gas prices also propped up wholesale ethanol, which neared $3 per gallon.
Prices for both commodities are now worth about half of what they were, but VeraSun still utilized high-priced corn. It cost VeraSun more to make the corn-based fuel than it was worth.
Pam Johnson of rural Charles City, a member of the Iowa Corn Promotion Board, said she often sold corn to the nearby plant but wants assurance about its liquidity before doing so again.
“Until they get their house in order, there’s not too much incentive to sell much ahead,” she said.
Call 866-224-2395 or see www.verasun.com/Reorganization for more information.
— Globe Gazette reporter Dick Johnson contributed to this report.
Matthew Wilde is a reporter for the Waterloo-Cedar Falls Courier, a Lee Enterprises newspaper.






JB Johnson of Britt wrote on Nov 6, 2008 11:27 AM: