VeraSun Energy has said in a filing in Delaware bankruptcy court that it has the right under bankruptcy law to reject farmers' forward corn contracts and that it intends to do so.
The matter will be heard Tuesday in bankruptcy court in Wilmington, Del., where VeraSun will seek the right to void any contract upon 10 days' notice.
That request has generated opposition from several groups of farmers who say VeraSun should either honor contracts to deliver corn to VeraSun plants, most set at corn prices well above current levels, or end them by Dec. 15 so that farmers can market their corn elsewhere.
"The debtors did not enter into the decision to reject corn contracts lightly," VeraSun said in a filing Friday. But the filing noted that the bankruptcy law contains sections "intended to allow a trustee or debtor in possession to eliminate burdensome, unprofitable contracts."
One of the objectors, a group of Iowa and Minnesota farmers assembled by Iowa state Rep. Mark Kuhn, said Saturday it would have no comment on the VeraSun filing.
Kuhn's group is asking the court to require VeraSun to notify those holding contracts if they will be honored or vacated by Dec. 15.
"We're being held hostage," Kuhn told a meeting of farmers in Floyd last week. The group has hired legal counsel to represent it in the Delaware court.
It is not known how much corn is at stake, but VeraSun's records show about 7,800 creditors, 5,780 of them in Iowa.
The majority are farmers who contracted to sell their grain to VeraSun for delivery this winter or spring. VeraSun has plants in Fort Dodge, Hartley, Charles City, Albert City and Dyersville and is the largest producer of ethanol in Iowa.
VeraSun filed for Chapter 11 bankruptcy on Oct. 31, citing huge losses from margin calls on its short positions when corn rose to a record $8 per bushel in July and August.
For the quarter ending Sept. 30, VeraSun reported a loss of $476 million. Its perilous cash position forced it to close the Dyersville plant and production facilities in Michigan and Minnesota.
VeraSun said last week it has received an "unsolicited" offer to purchase all of its assets, but the identity of the bidder or any details have yet to be revealed.
