Owner says case was a ‘perfect storm’
By JESSICA BRICKER
State officials continue to keep an eye on the payments being issued to farmers affected by two grain elevator failures in the area more than two years ago.
During the Indiana Grain Indemnity Board meeting in March, the board heard from Indiana Grain Buyers and Warehouse Licensing Agency Director Harry Wilmoth that reimbursement issued by the state has totalled more than $4.5 million for Salamonie Mills and $815,460.48 for Agland Grain. Both had operations that served Wells County farmers.
As of March, there are 12 petitions for review still active for Salamonie Mills. If the reviews are unsuccessful, the board was told nine of them are eligible for about $2.1 million in total compensation.
However, those reimbursements are only part of the farmers’ total losses and don’t include what has been ruled outside the 15-month period of eligible compensation.
State documents in 2020 showed losses for more than 200 farmers or groups, including more than $9 million in losses deemed eligible for up to 80 percent in reimbursement under state law.
At its last few meetings dating back to mid-2021, the indemnity board has been working through how to comply with a new state law that requires the agency to be audited by a third party. The cost of that audit is expected to be less than $75,000.
The law requiring an audit every five years was passed after the area’s grain elevator failures became heated topics during the 2021 Indiana General Assembly session. Two of the legislators who worked on the bills that year included Wells County’s elected officials, Sen. Travis Holdman, R-Markle, and Rep. Dan Leonard, R-Huntington.
Language that would include more compensation for local farmers did not make the final version of the law.
During a forum with voters in March 2021, Holdman said Salamonie Mills had been in the red for at least three consecutive years before the state stepped in. (See related graphic.)
“I know how to read a balance sheet. I’ve been in banking. There was a negative net worth,” Holdman said at the time. “I don’t understand why that wasn’t caught. I don’t understand why it was overlooked. I don’t understand why, if it was seen, it was allowed to continue to put the (indemnity) fund at risk and to put farmers at risk. I don’t get it.”
In a document released last August to the News-Banner after a public records request, the Indiana Department of Agriculture provided a 54-page transcript of a hearing held with the grain elevators’ owner Kevin Drayer. The hearing was in March 2020, the same month as the license suspensions for Salamonie Mills and Agland Grain and a month after an audit.
During the hearing, the financial state of the companies was thoroughly discussed and Drayer provided some insight on to how the companies’ financial standing spiraled.
“You know, we have concerns going into some of the financial solvency and liquidity of Salamonie Mills and their ability to pay grain producers,” Wilmoth told Drayer.
The minimum obligation requirement by law is the ability to pay 80 percent of what is owed. In February 2020, the state determined the company was only able to pay 34 percent of its debts. Total assets at the time was short of $6.3 million, with about $18.5 million owed in either grain or cash. Wilmoth told Drayer there was a concern about cash flow.
The company’s “current liabilities are three times the amount of (the-then) current assets,” Wilmoth said.
Drayer acknowledged the debts were “big” and the “financial picture isn’t very pretty.” He said his goals throughout the process had been to prevent hits to the indemnity fund, the bank and the farmers.
“You know, how I end up out of it personally doesn’t matter,” he said.
He also wanted to explain how it got to that point.
“Two years ago the growing season (in) our area, there was a tremendous amount of soybeans planted and less than 50 percent or right at 50 percent of normal corn picked. OK? Because the economics of the marketplace said to do that …”
He said they were “hedging” before the “worst-case scenario” happened. The market was falling and they were “paying a lot in margin calls” while “carrying those long futures (with) very little corn planted.”
“So it just has compounded itself for these last two years, horribly,” Drayer said. “You know, you think back and what would you have done different, I’ve looked at that. And one, you could have stopped taking care of your feed customers. That didn’t make a lot of sense. Who would have thought that we would have had two years with very short corn supply in our draw area? And I don’t think any of us could sit around the table and predict that. And that’s what has ate up my cash.”
“I guess if you were going to try to create a perfect storm,” he later added, “that was about as close as you could get.”
jessica@news-banner.com
