ACGA calls for corn contract protection

By Susanne Retka Schill | January 03, 2009
Web exclusive posted Dec. 19, 2008, at 3:43 p.m. CST

In the wake of VeraSun Energy Corp.'s default on corn contracts, the American Corn Growers Association is calling for federal policy reforms to protect American farmers, consumers and investors from negative impacts of radical market fluctuations caused by natural disasters, economic downturns, and the growing worldwide demand for food and biofuels.

"The recent VeraSun bankruptcy filing underscores a need for federal market stabilization policies that will prevent further setbacks to the fledgling American farmer-driven renewable energy industry by enforcing contract commitments and providing food and fuel reserves," said Keith Bolin, president of the ACGA. "Clearly good policy decisions now can help ensure healthy stable growth across the board."

The U.S. bankruptcy court handling the chapter 11 filing granted VeraSun approval to reject certain corn purchase contracts. The ACGA expressed concern that should the ruling establish precedence, corn producers will have no assurance that their signed contracts will be honored and paid as agreed on a timely basis when they deliver to an ethanol facility or elevator supplying biofuel plants.

ACGA is looking for support for the following policy recommendations:
  • Forward contracts held by buyers of farm commodities to be treated no differently than delivered goods or services in a court of law.

  • Federal credit guarantees to be given to struggling ethanol companies.

  • Transparency be increased on speculative positions in futures trading.

  • Minimum prices be set on ethanol through a price support mechanism and a strategic ethanol reserve.

  • Realistic price supports should be enacted for grains and oilseeds.

  • Strategic grain reserves should be enacted to ensure adequate feed stocks and allow for supply buffers.

"Congress has the power and the new administration has the authority to rapidly adopt these recommendations," said Bolin, also an Illinois corn and hog farmer. "The policies are necessary to protect and reward the investment America's farmers are making in developing sustainable solutions for food, fuel and renewable energy production. This should be viewed as the very core of homeland security. Increasing job opportunities, improving yields and guaranteeing fair market values will invigorate and sustain our rural economy making it possible for farmers to continue providing for the needs of our great nation."