7:15pm

Thu January 24, 2013
Agriculture

Bankruptcy—and Questions—Plague Northern Colorado’s Grant Farms

Colorado’s ongoing drought is just one of the reasons that the country’s largest Community Supported Agriculture farm (CSA) near Fort Collins filed for bankruptcy.

Grant Family Farms must now dissolve its operations in order to pay back millions of dollars in loans. More than 200 creditors across the country have been left in the lurch by the popular organic farm.

Grant Family Farms sent out notice of the bankruptcy in late December to CSA members, citing ineligibility for crop insurance along with hail damage and a government-mandated spinach recall.

“No fault of ours, it was a farm in California, but the federal government stopped spinach sales,” said owner Andy Grant after a recent meeting of creditors. “This has been an uncomfortable year.”

During a nearly two-hour meeting Tuesday, creditors got a better picture of Grant Family Farms’ finances—a structure that can only be described as byzantine. In addition to the organic CSA and raising thousands chickens, the farm sold vegetables commercially. But operations grew complicated in 2012. That’s when Grant Farms relinquished some control to the group of investors Localization Partners LLC in order to secure to a $1.5 million loan. That arrangement left creditors like Suzanne Rieder of Mountain Spirit Organic scratching her head.

Listen to audio from the Grant Farms creditor's meeting

“You may pay slow, but you always pay,” she said after the meeting. “We suddenly know that there’s no income coming in, there’s no response and they have no control. And I couldn’t find any answers.”

Now Rieder is out an estimated $60,000. Her chief complaint was lack of financial transparency in the months leading up to the bankruptcy.

More Drought = More Bankruptcies?

Colorado State University Professor of Agriculture Resource Economics Norm Dalsted says lack of available crop insurance for vegetable farmers, the competitive organic market and other factors contributed to the demise of Grant Farms. But the most important component is something the farm had less control over.

“A lot of people have been concerned about fuel prices and cost of fertilizer,” he says. “But the key resource that’s limiting to any farm operation is water. We have to have water.”

Much of Colorado right now is experiencing extreme to exceptional drought conditions—with southeastern Colorado seeing the worst of it. Crop insurance helped many farmers across the state recoup some losses. Dalsted warns 2013 could lead to even more bankruptcies if rain doesn’t come soon.

“Agriculture is a very important sector in Colorado’s overall economy. That directly ties to retail trade, wholesale trade, labor impacts,” he says. “Obviously it has a fairly significant impact in the economic environment of any localized community, particularly in Fort Collins.”

Bankruptcy —particularly chapter 7—for a large scale operation like Grant Farms leaves behind a complicated web that will be difficult for trustees to untangle, especially when multiple business partners were in charge of the farms different operations.

A Long Line of Creditors

At Tuesday’s creditors meeting there were other complicated questions. Curtis Bridges is one of about 8 renting land to Grant Family Farms. Bridges didn’t lose any money with the bankruptcy. But he wanted his land untangled from the proceedings so he can find another renter. That’s because Grant Farms stopped paying workman’s compensation insurance in 2012, which was one of the conditions of the lease.

“What I need the court to decide is what I can do with my land for 2013. Farmers this time of the year have to buy seed, fertilizer, exc., he said. “So we need to have some kind of decision, do we have a lease, or don’t we?”

A trustee appointed to oversee the Chapter 7 bankruptcy will be making decisions on this and other matters in the coming weeks.

Right now the immediate need for farmer and owner Andy Grant is to sell his assets so lenders can recoup their losses. But in the long line of creditors there will be winners and losers. So called “secured creditors” will be the first to be paid because they established collateral for their loans. Those who didn’t could have a longer and possibly more disappointing wait ahead.