By John Braese and Pat Caldwell
NYSSA – Snow crushed buildings at Farmers Grain in January but the company at the time was under a far more threatening load that couldn’t be shoveled away – millions in debt.
This month, that load proved too much, and the company collapsed, affecting farmers, dairies and investors across the Treasure Valley.
Farmers Grain, a grain broker and processor, closed a week ago when efforts to save the business through a bankruptcy reorganization proved to be too little too late.
A federal judge last week ordered the business liquidated, and the fate of modern grain elevators, storage sheds, truck fleets and more remains uncertain.
“It was a shock to everyone,” said Scott Cruickshank, an Ontario farmer owed $26,242 for grain he delivered to Farmers Grain. “There is a bunch of us that will lose a ton of money.”
Dwonn Unruh was a minority owner of Farmers Grain and its first employee. He was at the plant last week, moving out a load of wheat not encumbered by liens.
“It’s kind of hard-hitting deal,” he said, citing “bad management” as one factor without going into detail. Court records show he was paid $203,704 in the two-year period ending last April.
Chris Unruh, an Idaho farmer unrelated to Dwonn, was a customer and a major investor in the Nyssa operation. He said there was “betrayal” involved in the collapse but wouldn’t elaborate without talking to other investors. Now, a court trustee will decide what becomes of the company’s assets. They could all be sold in a way a new operator could reopen the grain operation, said attorneys involved in the case. It’s unclear how much farmers who are owed for grain will get.
Interviews with farmers and agriculture experts showed that Farmers Grain proved a competitive entry in the business of locally buying and selling grain, offering farmers better prices in particular for corn.
Galen D. Jantz, a Vale farmer, planted the seeds for the new business when he bought a storage bin in Nyssa in 2010. About three years later, Farmers Grain opened and from all outward appearances took off. It grew into a $30-million-a-year enterprise, buying corn from Oregon and Idaho farmers, processing it into feed, and then selling it to dairies. Farmers Grain also took in wheat from harvests, selling to brokers who then exported the grain.
Along the way, Farmers Grain spent millions in Nyssa. New grain elevators, storage buildings and processing sheds went up. A fleet of trucks traveled farm to farm to fetch tons of grain.
In 2016, the company was named Business of the Year by the Nyssa Chamber of Commerce and Agriculture.
“The partners at Farmers Grain have taken an eyesore run down facility and turned it into a state-of-the-art grain business,” according to the chamber’s program that year. “Our community is well served by the partners in Farmers Grain. All are of the highest moral character.”
Jantz explained in a written submission the company wanted to be “of service to the community in location and convenience as well as trying to boost the profitability to the area farmers, feedlots and dairies.”
He added, “There have been some bumps along the way but look forward to be of service to the community in the years to come.”
Within a year, though, something went very wrong.
What happened isn’t clear. Jantz left the Vale area for the Midwest and no working telephone number could be found. His partners in the business either didn’t return calls or provided little detail.
Matt Christensen, a Boise attorney representing Farmers Grain, said the company last year got into trouble in ways not yet understood over contracts for the purchase and sale of grains with a Washington company, Connell Grain Growers. The Washington company triggered a contract clause that required payments from Farmers Grain, Christensen said.
“That imposed a $10 million loss on the company,” Christensen said, which the company tried to pay with borrowed money.
Steven Neighbors, named a conservator of Jantz’s holdings, said Farmers Grain tried to hedge the corn and wheat market.
Hedging is setting a price in the future for wheat, corn or other commodities. At the time of the sale, the earlier price is used regardless of whether markets have gone up or down. With commodity trading extremely risky, hedging is a tool to limit losses, but can also limit profits.
Neighbors said that Farmers Grain used hedges against a price drop at the time of sale. He said that on subsequent sales, the company may not have been covered by such protection and grains had to sell at a lower price than expected.
“Galen thought he had it protected,” Neighbors said. “His whole motivation was he felt like farmers should be getting more of the value of their crop. He also felt he could cover the costs of what he was doing.”
Through late 2016, Farmers Grain borrowed heavily, according to court filings. It borrowed $1.8 million from Rabo in October, repaid $150,000 in November and then borrowed from Rabo again, adding $695,000 in debt.
Unruh, the Grand View farmer, put money in as well. He is listed as owning 30 percent of the company in his name and that of a trust he managed. In December, he loaned the company $4.2 million to keep it afloat.
“I took the most loss of anybody,” he said in an interview Friday. “I tried to shield everybody I could.”
Unruh also continued delivering grain to the Nyssa operation but wasn’t paid $1.4 million he was owed.
Other farmers, too, were delivering grain but not getting paid, according to federal court records. The losses are substantial – up to $430,000 in the case of WBH Farms of Nyssa.
In April, Farmers Grain filed for bankruptcy in U.S. District Court in Idaho, saying in court papers it was pushed by two creditors – an agricultural lender owed $8 million and the Washington grain dealer that is listed as being owed $2.8 million. The company filed for Chapter 11, meaning it needed court protection to reorganize the business, get back on a sound financial footing, and arrange to pay its debts.
In all, the company reported that it had $14 million in assets, including $5 million worth of corn stored in Nyssa, and $23.7 million in liabilities.
Not long after the bankruptcy, according to court filings, Jantz abandoned the rescue effort, leaving his brother from Weiser to temporarily manage the business. The brother didn’t have good news for creditors and the bankruptcy court.
The company said in an Aug. 14 filing that assets shown in the bankruptcy filing had been “overstated” and that the monthly business reports were “incorrect.” Corn said to be worth $5 million appears to be worth half that, Christensen said.
Rabo AgriFinance was the major farming lender that declared Farmers Grains loan in default and sought repayment of $8 million.
The company later persuaded the federal judge overseeing the bankruptcy case there was little hope of recovery. Rabo said the value of Farmers Grains’ assets had dropped by $1.5 million in the two weeks after the bankruptcy filing and by late May had dropped another $1.5 mllion. Rabo also said there had been “gross mismanagement” of Farmers Grain since it went bankrupt.
On Aug. 15, Rabo got a court order putting Farmers Grain into Chapter 7 bankruptcy, meaning a court-appointed trustee would dispose of assets and pay off creditors. Mike Johnson, a Utah attorney representing Rabo, said in an interview Monday that the change was intended to stop any further decline in the value of the company and provide the best chance for creditors to get their money.
“The company was hemorrhaging money – it was losing money,” Johnson said.
Court papers show that Jantz owned 40 percent of the firm. Orin Koehn and Chet Millsap of New Plymouth each owned 5 percent. Koehn declined comment, but bankruptcy records show he was paid $166,314 as an employee in the two-year period ending last April. Millsap, who records show was paid $221,515 in that same two-year period, didn’t return two telephone messages.
The list of customers owed money for grain deliveries includes some of the most prominent farming operations in the Treasure Valley.
Scott Cruickshank said he isn’t likely to get the money he’s owed from Farmers Grain, LLC.
“I thought they were going to make it,” Cruickshank said.
“Yeah, it is going to hurt. There is no doubt about that,” said Cruickshank.
For Fort Boise Produce, an area packing firm that did business with Farmers Grain, timing proved to be the difference, said Jim Farmer, president.
“We were fortunate. We’ve gotten all of our money,” said Farmer.
Still, Farmer said the bankruptcy is a loss for local agriculture.
“The way it affects us is that I think they were a very farm-family enterprise. They could take corn that could have a little higher moisture content. We are going to miss them and it is just tragic about what happened to them and tragic for those who lost money to them,” said Farmer.
Les Zaitz of the Enterprise contributed.
News tip? Call John Braese at 541-473-3377 or email [email protected]