Turner Grain bankruptcy law required lengthy legislative process

A little less than a year ago, Arkansas farmers appeared to be in the driver’s seat for another good crop. Prices were still good, moisture had been a little excessive, but not too much so, and corn growers were rapidly approaching harvest.

Then, multiple disasters struck. “On June 28 and 29th, people in this part of the state got a 10- to 12-inch rain, and if you lived around here you were just weeks away from harvesting your corn,” said Sen. Ron Caldwell, R-Wynne, chairman of the Arkansas Senate Agriculture Committee. “You drive by your field, and you had four feet of water on it.”

As a result, then-Governor Mike Beebe declared 10 counties, including the seven in Sen. Caldwell’s district, disaster areas. “It’s amazing to see how resilient farmers are because many of them along Highway 49 got the water off their fields, planted soybeans and still made a crop,” he said.

About the same time, he said, reports began surfacing that a major commodity merchandiser, Turner Grain of Brinkley, Ark., was not paying growers for grain the company had purchased at slightly higher than market prices.

The Arkansas State Plant Board began looking into the reports and examined the company’s books. “Eventually, they were shut down, put into receivership, and the receiver filed for bankruptcy,” said Caldwell, speaking at the Agricultural Council of Arkansas’ board of directors meeting in Brinkley.

“It’s been an experience that nobody has enjoyed being involved in,” said Caldwell. “But because of that we went back and looked at what we could do through legislation to help remedy some of the problems. The first thing I told someone is ‘there’s not a law we can pass that will stop the crime.’ Often laws only define the crime.”

Bankruptcy filing

(Turner Grain filed for Chapter 11 bankruptcy, listing $24.8 million in debts and $13.8 million in assets, last October. On May 15 U.S. Bankruptcy Judge Phyllis Jones ordered the case converted from a Chapter 11 reorganization filing to a Chapter 7 liquidation.)

In the months following the disclosures, Caldwell and other legislators met with members of the Ag Council of Arkansas, the Arkansas Farm Bureau, Arkansas Department of Agriculture, the state Plant Board, the Arkansas Rice Federation and the governor’s office.

“We tried to decide what we could do to help alleviate some of the problems and keep this from happening again,” said Caldwell. “The first thing we agreed on was that we would do no harm. We did not want to come in and create tougher circumstances for you to try to work and make a living in.”

Working with those organizations, members of the Senate and House Agriculture Committees drafted legislation “and then re-drafted and re-drafted a bill,” he said. “We started out meeting two days a week and soon we were meeting almost every day.”

Those meetings produced a bill (Act 601) that created a licensing program for anyone buying and selling grain in the state. For the first time, the state would identify those individuals buying grain from farmers and delivering it to buyers and regulate their activities.

Licensing strategy

“What we’re doing is setting up the basic strategy to license and regulate the grain dealers and identifying the dealers, and we’re going to do this through rules and the Plant Board,” said Caldwell. “Darryl (Little, Plant Board director) has been working on this to develop the regulations and has them in place.

“The single biggest feature we put in will be the hotline,” he said. “If corn planting had been on time last year, we would not have caught Turner Grain. They probably would still be in business.”

The hotline will not be a mechanism for growers to complain they didn’t get the contract they wanted, says Caldwell. “If your contract does not get paid according to the terms of the contract, whether it’s a 10-day contract or a 30-day contract or you put your grain in a pool where you get paid eight months from now. That’s all your choice for you to make with your buyer.

“If that contract is not paid when it is due to be paid then you have a way to go and complain to the Plant Board and identify that person. Then we know there may be a financial problem, and we can suspend his license or whatever we need to do.”

For more on the new law and regulations, visit http://deltafarmpress.com/government/grain-dealer-oversight-moves-arkansas-legislative-spotlight

 

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