The following is from Paul Jackson of Farm News Media.
As corn and soybeans are pulled into the combine, the crop that was so neat and orderly since May becomes turbid. Stalks tear, pods strip and dust flies.
The news in late August that Boersen Farms, rumored to be the biggest corn and soybean farm operation in Michigan, had been served with several lawsuits alleging insolvency leaves farmers who've been involved with Boersen feeling like that ripe plant.
With the Stamp Farms bankruptcy from 2013 still not cleaned up entirely, and with Boersen's connection to that creating more than a few rumors all its own, the only thing farmers really know at this point is there's a big mess to be cleaned up.
In 2013, the U.S. bankruptcy court approved an order for a bulk sale of Stamp's assets to Zeeland farmer Dennis Boersen for a little more than $22 million under a Chapter 11 bankruptcy.
One thing remains tidy as the lawsuits come to light. Boersen Farms has not filed for bankruptcy.
"Neither Mr. Boersen nor any of the Boersen Farm companies is in bankruptcy," said Cody Knight, one of Boersen's attorneys. "We are actively working on ways to avoid a bankruptcy filing and are in high-level negotiations with new lenders," he said.
Even the biggest lawsuit, from CHS Capital LLC, based in Minnesota, flails the bankruptcy rumor behind the machine.
"Prior to filing this action," the suit reads, "Plaintiff (CHS) discussed with Defendants (Boersen), the possibility of filing bankruptcy, but for reasons not expressed to Plaintiff, Defendants have made clear that they have no intention of filing for bankruptcy. Indeed, the Defendants have consented to the appointment of a receiver and the commencement of receivership proceedings. In doing so, Defendants admit they no longer have the operating capital to harvest their 58,000 acres of planted soybeans or their 25,000 acres of planted corn, which represents Plaintiff's collateral. The narrow window to harvest these crops is fast approaching. Therefore, absent Defendants voluntarily filing for bankruptcy, Plaintiff has no other option but to seek the protection of its collateral crops through a receivership."
Often, said attorney Henry Knier, of Smith Martin Powers and Knier, in Bay City, the court-appointed receiver in such cases is someone who "has knowledge of agriculture, understands finances and can quickly step in and take control of financial matters."
The goal of all that, ironically, is the same as filing for a Chapter 11 bankruptcy, Knight said.
"The purpose of the receivership is similar to a Chapter 11," he said. "It allows the business to continue to operate. The chief goal of each would be to harvest the crops and provide an opportunity to continue farming."
That's in CHS's interests too, since it is owed a reported $145 million, and the estimated value of the crops Boersen still has in the field is $50 million. CHS claims in the complaint that it is "faced with the imminent loss of $50 million of its collateral ..."
Also, CHS has already taken control of 14,000 Boersen acres, Knight confirmed.
He also confirmed that Boersen, due to CHS pulling its line of credit, has been operating on a cash basis this entire growing season.
Despite that, Knight said the farm's primary goal at this point is to accept a receivership and keep farming.
"We are actively working on avoiding a bankruptcy and believe we will find financing and avoid a bankruptcy," he said.
Avoiding bankruptcy is one thing. Paying dozens of farmers who may still be owed land lease money may be quite another.
Landlord Options
"Landlords, at this point, are going to have to wait and see what develops over the next several weeks," Knier said. "If they're concerned enough, they should seek legal counsel. I would expect that in the next few weeks, it's fairly likely that Boersen goes into either receivership or Chapter 11 bankruptcy, and depending on which way it goes, landlords should consider their rights and how to proceed."
Complicating matters is the volume of separate LLCs under which Boersen Farms operates. In the CHS complaint, there are 21 different LLCs and individuals listed. That alone should give farmers reason to examine their agreements.
"The first thing a farmer who's leased property to Boersen should do is read the contract," said Roger Betz, an agriculture economist with Michigan State University Extension. "If the LLC or other company named on that contract is not part of the lawsuits, you may have to gain some understanding on how to proceed. A lot depends on the contract and if Boersen goes into bankruptcy."
As farmers learned from other bankruptcy cases, they usually end up on the tail end of the list when the courts divide assets because, in general, they are considered "unsecured creditors." Under most bankruptcy cases, lawyers are paid first, followed by secured creditors.
That's standard procedure, but in the more general sense, could Boersen's situation impact farmer prices, equipment costs and other costs?
Not in the biggest picture, Betz said, but there could be local marketing impacts.
"Michigan as a whole in the corn and soybean markets is a drop in the bucket," Betz said. "It might possibly affect the local basis."
More affected are land rents, and that's where local farmers were pulled into the problem like so many corn and soybean plants.
"When Boersen was bidding land leases at $100 per acre over the average, it inflates the price of land rent," Betz said. "He was bidding it way out of the ballpark of what can be afforded long-term."
That price may have been fine when corn was selling—briefly for $8 a bushel.
"That was a record high ever, and people don't like it when I say this, but now that it's back to $3.60, it's back to normal," Betz said. "Corn traditionally is a break-even crop."
Knowing that, it seems a shallow explanation from Knight that Boersen's troubles revolve around the price of corn.
"The only thing I can assess is that, based on the fall in commodity prices, CHS pulled its line of credit," he said.
Regardless of how Boersen Farms got into this mess, questions about leased land persist. All that's clear right now is that farmers must wait and see what happens.
"For farmers, it all depends on the receivership order," Knier said. "If the receiver takes control of the whole operation, the receiver will deal with all creditors and all assets, and will put together a structure of how to either restructure or liquidate."
Also, depending on what the courts say, farmers ultimately may not have to be too concerned about the name on the contract.
"Usually things get consolidated, just so they can all be dealt with," he said.
No matter what happens, Knier said, farmers are advised to keep watching the situation.
"I don't know how large the impact will be, but I believe there is one that we'll feel at some point," he said.
If Boersen Farms can continue, it's going to be a tough row to hoe for the foreseeable future. And while the farm's website remains positive, it may ring hollow for dozens of creditors.
"Our dedication to agriculture will be the primary focus for the future," a statement on the website reads. "Keeping up with the latest technology, incorporating best practices and by using the best equipment, we plan to continue to grow and evolve to stay up-to-date and ensure crop production is at its highest level. With the next generation already stepping up, we know that we will continue in the path that was started for us."
Perhaps, at some point, farmers impacted by the lawsuits may be able to look back and see a clean field ready for the next year. But in the meantime, there's a mess to be cleaned up, and it will require patience.
"Farmers are all unsecured," Betz said. "They'll have to get in line like everybody else. These messes never get cleaned up to everyone's satisfaction. All we know now is that someone will lose money."