Seventeen North Dakota safflower producers are awaiting payment of more than $400,000 for 2008 oilseed contracts made with Sustainable Systems, a biodiesel company based in Missoula, Mont.
According to parent company Greenshift Corporation's annual report filed in mid-April, the company contracted for oilseed in 2008 at rates that far exceed current values and was unable to obtain loans to pay for seeds or remain operational. In total, the company owes $1.2 million to more than 50 growers in Montana and North Dakota.
An official from Sustainable Systems or Greenshift Corp. did not return several phone messages left this past week seeking comment.
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In existence since 1956, Sustainable System’s Culbertson oilseed crushing facility now sits idle as its contents are being prepared to be liquidated by the Montana Department of Agriculture in order to repay farmers in Montana and North Dakota.
Recently, Greenshift signed a consent agreement allowing the Montana Department of Agriculture to liquidate seed, crop and processed cooking oil held at several facilities along with bond money to repay producers, a relatively unusual event.
"Insolvency is not uncommon, especially in the current economic environment, but many times it ends in bankruptcy with the money from the liquidation of assets going to other things, leaving only the bond cash to producers," said Kevin Cramer, member of the North Dakota Public Service Commission, who is overseeing the case on behalf of the state's growers. "(North Dakota) producers are so lucky in this situation because the consent agreement allows the sale of crop, seed and oil at the facilities to be used to pay back growers. The Montana Ag Department has people at the facility going through paperwork and records and we are working closely with them, but it's just great that the (Montana Ag) Department is willing to share the assets of the liquidation sale."
With a $270,000 discrepancy between the $400,000 owed N.D. producers and the $130,000 bond filed by the company with the state, the money from the liquidation will be crucial, but it may not be enough. Finding buyers may be difficult, Cramer said, because of the company's use of specific seed varieties in its business and because there are only a handful of safflower crushing facilities in the country. Ron Zellar, information specialist with the Montana Ag Department, said the varieties, Montola 2000 and Montola 2003, were created by Montana State University under contract to the company for the Montola brand of cooking oil.
"These specialty seeds are seeing prices now that are half of what they were, so it's going to hurt some people, no doubt about it," Cramer said.
At the PSC meeting scheduled for Wednesday, Cramer said he anticipates the group will pass the motion to apply for trustee of the bond with the District Court, which would give the PSC authority to take the $130,000 from the bond company and begin to disperse the funds to area producers on a pro-rated basis, but it could be weeks before a decision is made. When funds do become available, affected producers will need to make a claim with the PSC and provide contract and delivery slip paperwork.
Although Montana Ag officials declined to reveal how much product was available for liquidation, Zellar said they anticipate to be able to pay farmers 80 cents on the dollar from the combination of bonds and funds from the asset liquidation. He said he hopes to have the first checks mailed out within the next two weeks and is optimistic that the liquidation process can be completed within the next two months. Brent Sarchet, business examiner for the Montana Ag Department, added that Greenshift has agreed to cover any deficit owed to producers after the money from the bonds and liquidation are exhausted.
Being handled separately, the company also signed 2008 oilseed contracts with nearly 30 North Dakota safflower and sunflower growers who have not delivered the seed. Sarchet said Greenshift will be working with those producers on an individual basis to resolve any disputes.