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Published April 30, 2012, 10:19 AM

PSC continues to investigate Falkirk, N.D., elevator

FARGO, N.D. — Falkirk Farmers Elevator in McLean County, N.D., remains in turmoil and people still don’t know what happened nearly two weeks after it was closed to deal with inventory shortfalls.

By: Mikkel Pates, Agweek

FARGO, N.D. — Falkirk Farmers Elevator in McLean County, N.D., remains in turmoil and people still don’t know what happened nearly two weeks after it was closed to deal with inventory shortfalls.

Art Perdue, an interim manager, said the grain side of the business remains closed while the company works on determining inventory amounts and obligations. Enerbase, a cooperative based in Minot, N.D., which Perdue managed until retiring in December 2009, is operating the company’s agronomy side. The Falkirk elevator’s employees are still employed, doing the work for Enerbase.

About 40 to 50 farmers who paid “probably around $2 million” in prepay fertilizer and chemical arrangements, cannot pick up those chemicals, Perdue acknowledges. As planting season goes into its most frenzied period, those farmers have to decide whether to deal with Enerbase, or go to its competitors.

The North Dakota Public Service Commission is still studying the matter. The agency was in Falkirk on April 16, looking into the books in response to reports that the company had closed its doors late the week ending April 13.

Commissioner Tony Clark in Bismarck, N.D., said calls started coming to the agency the second week of April from producers concerned that the company had shut itself to business, and reported elevator staff was handling grain, perhaps in an effort to inventory it. An elevator must get permission from the PSC if it closes its doors for more than 15 consecutive days.

Farmers calling the PSC were concerned about getting prepaid fertilizer and seed deliveries, which are not directly under PSC jurisdiction, Clark says.

North Dakota Agriculture Commissioner Doug Goehring says his department has no immediate jurisdiction over the matter, but that he has been talking with elevator board members and management to “figure out where things are at, and what their intentions are,” he says.

Goehring says he thinks the board is “committed to resolving this.” He says the solution may involve a liquidation of assets. He says he thinks prepay fertilizer and chemical obligations would take a backseat to grain obligations.

“Some of the directors on the board are directly impacted,” Goehring says. Some have a substantial amount of prepay chemical and fertilizer. Another director has close to $500,000 in grain sales and has to wait to be compensated, he adds.

Falkirk Farmers Elevator is a farmer-owned cooperative with a satellite facility in Hazen, N.D. It has storage capacity for 650,000 bushels at Falkirk and 500,000 bushels at Hazen in Mercer County, for a total of 1.15 million bushels. Clark says the two facilities have separate licenses, but have a collective bond of $380,000.

Perdue could not say whether there are any legal actions against the company, or involving management. Ron Hefta, the manager, no longer works at the company. A phone number for Hefta was disconnected. Board chairman Michael Guenthner did not return a phone message.

Brent Petersen, a farmer from Washburn, N.D., who had served on the Falkirk Farmers Elevator board until six years ago, says the company owes him about $80,000 in anhydrous ammonia fertilizer that he’d prepaid 100 percent back in early March. He says he had purchased his dry fertilizer from a different source this year.

“We’ve got plenty, I guess, but we’re not the biggest one involved, I guess,” Petersen said.

Taking a risk

It’s typical for elevators to ask for prepayment on fertilizer to lock in the product and the price. A PSC-run $6 million-plus self-funded indemnity fund is in place for price-later grain sale contracts, but nothing protects farmers in prepaid fertilizer and chemical sales, Goehring says. The commissioner says he has a “deep concern for people who have paid for product” but says that although it may sound beneficial, it might not be practical. “When you think of all the entities out there that supply services to farmers, where do you start and where do you stop?”

According to a listing in the North Dakota Grain Dealers Association directory, the Falkirk site handles small grains, soybeans, dry edible beans, oil sunflowers, oats, flax, canola and corn. It has agronomy services, chemicals, dry and liquid fertilizers, chemical fertilizer application, feed, seed and agronomy. Dry beans were a substantial part of the grain business, Perdue says.

Problems at the elevator surfaced in

audits having to do with a potential merger with the CHS-Garrison Farmers Union Elevator in Garrison, N.D., but that deal is now on hold, Perdue acknowledges. Another source in the region’s grain handling business, who asked not to be named, says he understood the Falkirk elevator membership voted almost unanimously to merge with Garrison, and that the merger was to have taken place June 1.

This is the second elevator financial crisis that the PSC is handling.

In a separate matter, Commissioner Clark acknowledges that the PSC on April 9 had been appointed trustee for the Anderson Seed Co. facilities in its Durbin and Selz, N.D., locations. The Mentor, Minn.-based company, with facilities in Minnesota and Redfield, S.D., and the associated St. Hilaire Seed, also of Mentor, has sold much of the company to Legumex Walker Inc., a Winnipeg, Manitoba-based company. The NDPSC plans to publish its final notice to the public to file claims against a $280,000 bond on about April 30. Then farmers will have until about mid-June to file claims against the bond.

Clark says it is not known how much of the grain might be covered by a state indemnity fund established to protect farmers with so-called price-later contracts. The fund is a check-off for price-later transactions and stops accumulating when it reaches $6 million, but the accumulated interest has allowed it to grow to just less than $7 million, Clark says.

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