SD elevator loses licensesState regulators have been monitoring the cooperative’s financial status for two years.
By: Ross Dolan, Forum News Service
PIERRE, S.D. — The South Dakota Public Utilities Commission acted unanimously April 23 to revoke the grain-buyer and grain-warehouse licenses of the Gregory (S.D.) Farmers Elevator.
On March 29, the PUC had suspended the company’s licenses. The elevator’s owners and management were given 15 days to file an appeal or present a plan to address its financial problems. No plan was presented April 23, which left commissioners little choice but to proceed with revocation, says PUC Vice Chairman Chris Nelson.
State regulators have been monitoring the cooperative’s financial status for two years.
Nelson says checks totaling $307,000 have not cleared.
“At this point, there’s $307,000 that’s owed to two producers, which was part of a voluntary credit sale,” he says. “In other words, those are two producers who chose not make a cash sale, but chose to extend voluntary credit to the co-op instead of getting cash on the barrelhead.”
Another previously unpaid check for $3,648 has since cleared, he adds.
The $307,000 will be paid once assets are liquidated. The board of directors of the elevator has been actively trying to liquidate and sell the assets of the elevator to cover its obligations, according to Nelson.
State regulators discovered in earlier audits that at several points the elevator had minimal, or negative, operating capital.
A new law took effect April 1 requiring that any warehouse or buyer who is in a negative working capital situation must notify the PUC. The law is part of a package of reforms passed by the Legislature at the PUC’s request in the wake of the Anderson Seed insolvency.
Nelson says elevator manager Alysia Adams and co-op board chairman Sherman Vomacka were on the phone with the commissioners during the April 23 meeting.
“They’ve been trying to market the facility for the last several weeks and those efforts are ongoing,” Nelson says.
At one time, the group was trying to raise additional capital but was unsuccessful in that attempt, which led to the March 29 license suspensions.
“I think at this point, they realize they have to liquidate the facility and make sure everyone gets paid,” Nelson says.
Any buyer would have to apply to the PUC for new grain-buyer and storage licenses.
The PUC’s influence in the operation of elevators is limited, Nelson says.
“It’s important to understand that grain warehouses, in the course of operating in the free enterprise system, will occasionally go broke.
“It’s not the PUC’s responsibility to interfere with what happens in a free market system. Our responsibility is to protect farmers and producers to make sure they get paid when these types of things occur.”
PUC Chairman Gary Hanson says the PUC hopes the elevator is purchased and reopened.
“We’re certainly interested in seeing the elevator change hands because it provides a necessary service to the area,” he says.
“We’d like to see someone providing that service.”