WFS: MF Global scandal won’t affect project
Like many grain companies, brokers and producers – a farmer-owned cooperative in southern Minnesota felt the affects when MF Global filed for bankruptcy last October.
But, WFS Chief Executive Officer Todd Ludwig says collapse of the largest clearinghouse for margin deposits on futures had little impact on the company’s balance sheet.
“It wasn’t enough to significantly impair our business or put it at risk,” he says.
A sign that the co-op expects to be in business for a long time is the on-going construction of the $24 million grain facility outside of Delavan.
“We’re still ahead of schedule. If that continues we’ll be operating by the end of August,” Ludwig says.
In addition, WFS spent $4 million last year repairing the Wells elevator and did $4 million in upgrades to the Lewisville facility.
Ludwig wouldn’t say how much the co-op had in hedges or the amount of money that still needs to be recovered.
He estimates the co-op has gotten back about 72 percent if its margin call money.
“It’s a substantial amount that’s out there,” he says. “But, there are people willing to buy our positions. That would bring us to 80 and 90 percent recovered. We expect to get our money back.”
Grain elevators do business by paying producers cash for commodities and then take a hedge position to reduce the risk of falling prices.
MF Global went into Chapter 11 protection when attempts to replace an estimated $1.6 billion in missing customer money failed.
Ludwig says he was “angered and disappointed” when hearing the brokerage was going under.
“It shouldn’t have happened. There are laws and procedures they should have followed,” he says. “I’ve lost trust in the market system and the SEC agency that didn’t do what it’s suppose to.”
Ludwig points out that WFS’s funds should have been held in segregated accounts, meaning the cooperative would have been protected 100 percent.
“I’ll let the courts decide if there was any criminal action or wrongdoing,” Ludwig says.
The cooperative is among the state’s largest grain elevator operators. It operates 18 elevators serving more than 4,000 producers in southern Minnesota and northern Iowa.
Last year, the company handled some 65 million bushels of produce and had $565 million in sales.