Iowa Agriculture Secretary Bill Northey expects ethanol producer VeraSun to continue operations and pay its corn suppliers despite the South Dakota-based company’s announcement it is filing for bankruptcy.
Northey says VeraSun needs to apply to the bankruptcy court to be able to pay corn producers who delivered corn between the time that the company was paying for corn, and then filed for bankruptcy. If the company can’t pay producers, the producer could be paid through the grain indemnity fund if it was a normal sales process, according to Northey.
Northey says the bankruptcy of VeraSun shows how the industry has rapidly changed, but doesn’t indicate an overall pattern of problems. Northey says the industry has gone through a lot of change in the last five years, from a time when ethanol was "extremely profitable" to higher prices of grain and lower prices for ethanol.
He says the changes made margins very thin, but he says each business is different. Northey says VeraSun had a unique situation that impacted it. Northey says VeraSun went through a "hedging arrangement" where they tried to buy grain and keep the price from going to high and ended up "getting upside down."
He says the published reports showed VeraSun lost $100 million in the hedging, while most ethanol companies did not have the problem. VeraSun has Iowa facilities in Hartley, Albert City, Fort Dodge, Charles City and Dyersville. Northey says grain producers with questions should call the Iowa Department of Agriculture and Land Stewardship’s Grain Warehouse Bureau.