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Published July 01, 2013, 10:14 AM

ND PSC makes progress with Anderson Seed claims

The North Dakota Public Service Commission says it is making progress in resolving farmer claims against Anderson Seed Co., but the case remains unsettled.

By: Mikkel Pates, Agweek

FARGO, N.D. — North Dakota Public Service Commission officials say they are making progress in solving some farm claims against Anderson Seed Co. of Mentor, Minn., but have not finally settled the case, as a hearing cancellation indicates.

Jon Jensen, Grand Forks, N.D., a special assistant to the North Dakota Attorney General in the case, says the PSC and Anderson Seed have not “finalized, but are in the process of solving some claims, rather than incur some costs” in court.

“What we’re trying to do is gather all the assets we can from Anderson Seed Co., which will eventually be paid over to the producers,” Jensen says. The hearing, which was scheduled July 9 to 11, was cancelled on June 26 because the case had been “settled,” the clerk of court told Agweek.

Jensen says any settlement would be subject to approval from the court, and only after input from farmer creditors. The issue is over “what Anderson Seed Co. has,” Jensen says.

The case is now more than 16 months old, but the timetable is still unclear, Jensen says. “Obviously, we wouldn’t take it off (the court schedule) if we’d expect it to be back on soon,” he says.

Farmers delivered seed in late 2011 to the company before it went insolvent and sold most of its assets to Legumex Walker of Seattle in February 2012. The case is in Fargo because Anderson Seed owned a receiving station in Durbin, N.D., in Cass County.

North Dakota farmers have made $2.2 million in claims in the case. South Dakota farmers are owed another $2.6 million, where officials are reportedly studying the case for potential criminal charges. No Minnesotans have filed claims, but a Pierre, S.D., CHS Inc. affiliate elevator has a case against Anderson pending in Polk County District Court in Crookston.

Gathering assets

In North Dakota, the PSC has been named trustee of a $280,000 warehouse/buyer bond in the case, but won’t make payments from it until other Anderson Seed assets are “gathered,” says Jensen and PSC Commissioner Randy Christmann.

Similarly, the PSC administers payment from a Credit-Sale Contract Indemnity Fund, but has held off on making payments from that, pending Anderson Seed asset availability.

Separately, Jensen couldn’t say whether there is any update on talks the PSC has had with Legumex Walker. The PSC has said Legumex Walker should disgorge, or give up, the $1.5 million in seed inventories it purchased from Anderson Seed. Legumex Walker, with its parent company in Winnipeg, Manitoba, has said it will disgorge funds if a court requires it.

Jensen emphasizes the PSC has no legal actions against Legumex Walker. Legumex Walker has said it needn’t disgorge the $1.5 million because the purchase was “in the normal course of business.”

Farmers and their attorneys in the case are getting impatient. Mike Gust, a Fargo attorney with producer clients, says the Legumex Walker funds can’t be in the “normal” course of business because the sale of all a company’s assets can only happen once.

Deferred-pay bonds

Meanwhile, grain industry officials say farmers in the Dakotas and Minnesota are eligible to pay a premium for bond protection on some contracts.

Bob Zelenka, executive director of the Minnesota Feed and Grain Association in Eagan, says the bonding has been available to all qualifying elevators for only about a year, and only on “deferred-payment” contracts. Deferred-pay contracts are a subset of the credit-sale contracts, in which the price is set but elevators agree to pay the amount at some date after delivery — usually into a new year for tax purposes.

Zelenka’s association, which has an insurance agency, started offering the program last fall. He says some farmers have been using it to contract sale prices of grains to be paid two or three years later. Coverage can be on one contract or a variety of contracts, he says.

These deferred-payment bonds are underwritten by CNA Surety of Minneapolis. Zelenka says some elevators are reluctant to promote it because it gives the impression that producers can’t trust their elevators to pay on contracts.

Derek Underwood, an underwriter with CNA Surety, says the bond was developed by CHS Inc. (then Cenex Harvest States) about 20 years ago, and was offered first to CHS line elevators and exclusively through its Ag States Group, an insurance and risk management subsidiary. When CHS and Ag States didn’t want to share in the risk, it was opened up to any qualifying elevator that wanted to bond, and available for individuals to acquire, for a premium.

Underwood says the deferred-payment contract bonds have been most popular with larger elevators. He estimated that five to 10 elevators in Minnesota might be using it, but he doesn’t know how many contracts or how much value is protected.

Steve Strege, executive director of the North Dakota Grain Dealers Association in Fargo, acknowledges that deferred-price bonding has just recently become available in North Dakota. But he says it competes with the $6 million self-funded indemnity fund, which offers 80 percent loss protection for all credit-sale contracts — both deferred-payment and price-later contracts. He says he’s heard rumors of a price-later contract.

Christmann thinks the bond program might be the right way to go, and says some farmers don’t like having to pay into an indemnity fund that adds to their costs.

“I may personally start promoting it as a tool for North Dakota producers,” Christmann says, adding that he wants to study the pros and cons.

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