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Grain Market Gifts

Max has been a client for decades; he farms in Southwest Ohio. Max is a pretty easy going guy, but he takes business very seriously.

I suppose it was early summer of 2018, Max called me to ask my opinion about a very unusual phone call he received from the Ohio Department of Agriculture (ODA), Grain Warehouse Division.

Just for clarification, the ODA calls grain elevators “grain warehouses”. The Grain Warehouse Division’s tasks include issuing permits to qualified applicants to operate a grain warehouse, which includes the authority to buy, take possession and sell grain and oilseeds. ODA also audits grain warehouses whenever they see fit to ensure each warehouse is financially sound to conduct grain merchandising.

When a grain warehouse gets into financial trouble, ODA has the authority to help the warehouse “work out” its problems as well as shut it down, lock the doors and divide the assets among the creditors. Farmers with grain at such an elevator on Delayed Price or Price Later or basis contracts are unsecured creditors and wait at the end of the payment line for what money might be left after the secured creditors get 100% of their money, if 100% is available. If 100% is not available for the secured creditors, guess what the unsecured creditors get, which is usually the case.

These farmer creditors can file a claim with the ODA to collect a percentage of their loss from the Ohio Grain Indemnity Fund which was established in 1983 to reimburse farmers when a grain handler becomes insolvent. The fund initially was funded by grain check off from farmers’ grain settlement checks until it is fully funded as specified by the Ohio Revised Code.

Adam Boerger called Max out of the blue, identified himself as an ODA Grain Warehouse Inspector. Adam told Max to get a piece of paper and write the phone number for Coshocton Grain, call and ask for so and so, who will write a check to Max for 11, 900+ bushels of corn at $2.91 a bushel.

After Max caught his breath, he asked Adam what in tarnation was going on? Max told Adam he had never delivered grain to Coshocton Grain and, in fact, he had never done any business with Coshocton Grain, which was located on the opposite corner of the state.

Adam said words to the effect, “Look, Max, we have been working on this settlement for years. In a nut shell, after Peavey sold its Lily Chapel grain elevator to another operator, who then got into serious financial trouble, the owner leased it to Cargill for a couple years. The records show you delivered 11,900+ bushels of corn to Lily Chapel and you were never paid. When the Cargill lease ended, Coshocton Grain bought the assets and liabilities of the Lily Chapel grain warehouse.”

Max told Adam, “I am sure I was paid for every bushel I ever delivered to Lily Chapel. In fact, I am quite sure Cargill paid me for those bushels that year. This isn’t right, Adam.”

Adam said, “Listen to me Max, we really want to get this mess cleaned-up. Will you please just call Coshocton Grain and tell them where to send the check so we can get this mess off the books. The records clearly show you are due this money. Now, do us favor and just call Coshocton Grain and tell them who to make the check out to and where to send it.”

Max called me immediately, explained the situation. He talked like he had been hit in the head with a small hammer; quite disoriented for Max, but he insisted he was paid for every bushel he ever delivered to Lilly Chapel. Having worked with Max for more than 30 years, I knew he knew he had been, in fact, paid for those bushels.

I reminded Max how government people always think their numbers are correct, that Max had no way to prove their numbers wrong and, if he did not take the settlement, ODA was going to be really ticked-off at him. I told him I was sure the mistake was not by ODA, but by the people recording the grain coming in and going out of Lily Chapel. Most people going belly-up do not keep good records because good records tell them what they do not what to accept.

Max said, “Roger, I am telling you I was paid for every bushel I took there. I am not owed this money!”

I said to Max, “Do you want to go to court, have a trial to prove you are not owed this money? Of course not! Do everybody a favor, including yourself and me, make the call, get your money. If you can’t bring yourself to spend the money, put it in a savings account until you are convinced no one will ever demand that money back. And, by the way, when you do make the call, tell them the price should be $3.56.”

Max got the money, but not $3.56. He had to settle for only $2.91 as I recall, about $34,000.

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