WALHALLA, N.D. - McM, Inc. may be in Chapter 7 bankruptcy liquidation, but a set of his former landowners have scrambled to start a brand new company - Elkhorn Farms LLP.
The new farm accounts for half of the acres that had been farmed by the huge McM, which filed Chapter 7 bankruptcy liquidation in February. McM, headed by Ron McMartin, Jr., from St. Thomas, N.D., had been a 59,000-acre farm in 2011 and had down-sized to 39,000 acres in 2016.
The new Elkhorn Farm includes about 20,000 acres - mostly land owned by several cousins in the Johnson family in Walhalla, N.D. Officially, Elkhorn Farms was registered as a North Dakota business on April 7, 2017. It is located at 1101 Central Ave. in Walhalla - originally the Walhalla State Bank and more recently home to a law office.
Kenneth Hilton "Kenny" Johnson, of Walhalla, is the registered agent for Elkhorn Farms, a 50-50 partnership with his cousin, Al Johnson. (Kenny is not a partner in Johnson Farms, LLP, which is run by Al and other Johnsons, at Walhalla.) Other former McM landlords are also likely to be working with Elkhorn Farms.
"This farm really came upon us in the last few months," Kenny Johnson says in an interview with Agweek. "You've got to remember this has been fast. The McMartin bankruptcy was announced in February and it was like, 'Are we going to rent this land out, or are we going to farm it?' I called up Al and said 'Al I want to farm it,' and he said, 'You can't, we don't have a farm.' But the farm was put together. It's pretty amazing."
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When the McM finances stopped working, Johnson saw an opportunity.
"We took it - Al and I took it," he says.
The name of the new business is reminiscent of Elkhorn Ranch, a spread that Kenny Johnson owns separately at Medora, N.D. There are separate farming headquarters at St. Thomas and Grand Forks, N.D. The farm is spread out from Pembina, N.D., to close to Mayville, N.D.
'We took it'
Elkhorn Farms employs about 15 people and may increase to 20 or 25 at harvest. That's far fewer than the old McM which employed 15 year-round employees, along with 150 full-time seasonal employees who worked from March to the November harvest. That was largely because of the labor involved with fresh potatoes.
The new operation will raise mostly soybeans, wheat, and "some" red potatoes, Kenny Johnson says - roughly 2,000 acres, which is less than half of what McM had grown. Significantly, they won't lease a $2.5 million facility with equipment for handling potatoes at St. Thomas, in part because it's involved in the bankruptcy.
It won't raise management-intensive dry edible beans or sugar beets. (McM once was the largest sugar beet producer in the region, with 11,000 acres.)
Some of the land in the 20,000 acre Elkhorn Farms has been owned by the family for over 50 years, but some was purchased more recently at higher prices, Kenny Johnson acknowledges.
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He says they don't see Elkhorn Farms as a one-year rescue thing, but as an entity that will continue in the future.
"A lot of people probably saw it as not a great time to get in, but we saw there's some opportunity to get in as far as equipment and pricing. It's kind of soft on some of this stuff right now."
The long view
"I think Al and I are both thinking that this is something that hopefully is going to have some success and be an ongoing thing," Kenny Johnson says. "Al has two boys that farm. I've got three boys who I think are interested in farming. I'm hoping that - nobody knows - but I'm hoping it has some success and longevity."
It takes "millions" of dollars to put the new farm together, Kenny says, declining to be any more specific.
Brian Johnson, a cousin who is chief executive officer of Choice Financial, "really has been a key person that backed and supported to get Elkhorn Farms up and going so fast. It's a big deal and there wasn't much time," Kenny Johnson says. Craig Hanson, senior loan officer for AgCountry Farm Credit Services in Grand Forks "worked hard and came through," he adds.
The farm purchased some potato planters and specialty potato equipment that had been reacquired from McM by Kinetic Leasing of Fargo, Kenny Johnson says.
"It was all third party purchases on equipment, down to every screwdriver, every bolt, every tire," he says. "It's been a pretty amazing deal to actually work it out."
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Elkhorn Farms has purchased 18 live-bottom semi-trailers and some of the trucks had been used in the McM operations in the past.
They worked through True North Equipment, Inc., of Grand Forks, to get machinery lined up. Kenny Johnson says the company went "the extra mile... put the whole line of equipment together at more than reasonable prices in a short period of time." They purchased about 16 used tractors, and planting and tillage equipment.
At this point, they plan to have the farm custom harvested on the soybean side but will "obviously harvest our own potatoes," he says.
Changed plans
Originally, Ron McMartin Jr. reported to the McM bankruptcy trustee that he would be an employee of Elkhorn Farms - a fact that Kenny Johnson initially confirmed in early April. But in an April 21 interview with Agweek, Kenny Johnson said that arrangement had changed and didn't explain why. McMartin's daughter, Rachel, is in the office for Elkhorn Farms, he says.
"This has been a fluid situation," he says, regarding McMartin's status with the new company. "Nobody has really known how it would shake out, but at this point, Ron is not an employee of Elkhorn Farms and does not work with us ... We're leasing his father's farm(stead) to work out of from the St. Thomas farm."
For 20 years, McMartin has been a "great business partner to a lot of businesses in the Red River Valley. I consider him a good friend," Kenny Johnson says.
McMartin ran a "mega-farm," so having him as an employee of Elkhorn Farms "isn't probably the right fit," he says. "That's about all I can say about it at this point."
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Eric Eischens, a former farm manager for McM, was said to be managing Elkhorn Farms' headquarters at St. Thomas - a farmstead owned by Ron McMartin Sr. Kenny Johnson says Eischens now has made other plans.
Meanwhile, Kyle Zak, a manager for the McM's Grand Forks Farm and Kenny Johnson's nephew, will serve as the overall farming manager for all of Elkhorn Farms. Earlier, Zak was described as only the manager of the Grand Forks farm headquarters for Elkhorn Farms.
