By: Jeff Haarer, Producer Security Manager, Michigan Department of Agriculture

As the financial difficulty of VeraSun Energy Corporation continues, the Michigan Department of Agriculture’s Producer Security auditors are closely monitoring the situation with the VeraSun Woodbury ethanol plant in Ionia County. Our auditors are in direct communication with affected farmers and grain elevator operators assessing the potential economic impact for Michigan.

On October 31, 2008, VeraSun, the parent company of the ethanol plant in Woodbury and 24 of its subsidiaries and affiliates, filed voluntary petitions for relief under Chapter 11 of the Federal Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. VeraSun is attempting to pay for all farm produce delivered after October 11, 2008. At this time, the Woodbury plant is not receiving any corn shipments; however, VeraSun is hopeful to secure financing and authorization from the courts to resume operations or that they will be purchased by another entity.

Michigan producers holding forward contracts with VeraSun should contact legal counsel, as the Grain Dealers Act, PA 198 of 2003, as amended, and the Farm Produce Insurance Act, PA 198 of 2003, as amended, has no jurisdiction over contracts when the farm produce has not been delivered. The Farm Produce Insurance Fund was not designed to be used to reimburse Michigan producers for their forward contracts.

The Farm Produce Insurance Authority (FPIA) was established in 2003 to provide for reimbursement to a participating producer for losses suffered when a grain dealer declares insolvency or is otherwise unable to pay its claimants for grain delivered but not paid for. The FPIA has a current balance over $6.2 million and assessments will remain suspended until the fund drops below $3 million.

Since 2005, the FPIA has paid over $900,000 in claims to 91 producers and has recovered over $600,000 from bankruptcy and probate proceedings. Under the voluntary provision of the FPIA, 67 producers have requested assessment refunds. To receive the protections of the Grain Dealers Act and the Farm Produce Insurance Act, it is essential that the producer transacted with a licensed grain dealer and that the contracted farm produce was delivered.

For a list of licensed grain dealers or for more information on the Farm Produce Insurance Fund and the Michigan Grain Dealers Act go to www.michigan.gov/graindealers. Any Michigan producer that has not been paid for farm produce delivered to VeraSun or any other licensed grain dealer should contact my office at 517-241-2865 or by email haarerj@michigan.gov.