Bankruptcy of big ethanol producer may mean less money for farmers

The buyout of Iowa's largest ethanol producer, VeraSun, may mean that farmers get lower prices for their corn. Dan Pillar of The Des Moines Register writes, "Farmers who sold corn to VeraSun under futures contracts for delivery later this year or next at prices above the current $3.50 per bushel level on the futures markets may not get the contracted price."

As reported here the bankruptcy of VeraSun, the purchaser of roughly 8 percent of Iowa's annual corn crop, came about because the company locked into contracts with corn growers at prices above the current market value. Bankruptcy may solve this problem. "VeraSun has said that under the terms of bankruptcy law, it may exercise its right to void or change the terms of futures contracts," Pillar notes.

The Iowa Department of Agriculture's Grain Indemnity Fund would provide support for farmers who lose money when they are not paid for grain that was delivered to a licensed warehouse but it can do nothing in cases where companies like VeraSun do not honor previously negotiated contracts. (Read more)