A northeast Nebraska ethanol plant has stopped taking deliveries on corn and its management is appealing to farmers with contracts to provide that corn for less money to help the plant survive what its management describes as “this economic storm.”

The leadership of Husker Ag LLC at Plainview met with contract holders at the nearby Osmond city auditorium Monday.

General manager Seth Harder was not available to answer questions afterward. But the letter inviting farmers to attend referenced rapidly rising corn prices early in 2008 and then “a mass selloff of commodities” and rapidly falling corn prices later.

“We would like to discuss all options available to both of us to help Husker Ag make it through these tough economic times while continuing to provide a valuable market for your grain,” said a single-page meeting invitation signed by Husker Ag Board Chairman Mike Kinney.

The management of VeraSun, which owns ethanol plants at Ord, Albion and Central City, filed for Chapter 11 bankruptcy protection in October after getting caught up in a situation in which it bought corn at $6 a bushel and higher for use in Nebraska and at its plants in other states.

Under the terms of the pending bankruptcy proceeding, Sioux Falls-based VeraSun was allowed to reject contracted deliveries to plants that had been taken off line as it continues to seek a financial solution.

Lincoln attorney Steve Mossman, who specializes in agricultural law and represents several farmer-clients in the VeraSun proceedings, doubts that Husker Ag can pursue that same strategy.

“Absent a bankruptcy filing,” Mossman said Monday, “the contracts between Husker Ag LLC and producers would be binding and enforceable by producers, particularly in terms of the price that’s set in each of those contracts.”

Signs of trouble at Plainview, located about two hours north of Lincoln, are only the most recent for an industry that had been expanding rapidly and largely to respond to a federal renewable fuels mandate.

Besides VeraSun, among the other signs of turmoil are decisions to stop construction on projects at Aurora, Carleton and Wahoo and the defaulting on a $10 million loan by Advanced BioEnergy.

Advanced BioEnergy owns the Fairmont plant, which began operating in 2007, as well as two sister plants in South Dakota.

Plainview attorney Bruce Curtiss attended the Monday meeting in Osmond at the request of a farmer who had signed contracts for corn delivery.

Curtiss later estimated that about 200 people were on hand. He characterized the company position this way: “Essentially, modify enough of these contracts so we can survive or we may not survive.”

He sensed “a desire to accommodate” among farmers selling corn to the plant. “But there was a nervousness about delivery of grain, in general, with the specter of bankruptcy hanging out there.”

As viewed from the company side, Curtiss said, “they suffered losses in the futures market. And now there’s the potential of paying much more than would be necessary for grain if they have to honor all the contracts.”

The rapid drop in the corn price “cost Husker Ag millions of dollars in the futures market here in the last six months,” he said.

Complicating matters further, as Curtiss described it, was an inability to sell ethanol at prices that would cover high corn costs. “They couldn’t sell ethanol far enough out to match up with the corn contracts.”

As the Plainview ethanol plant’s management and its corn suppliers try to agree on a solution, the Nebraska Department of Agriculture will host two workshops today in Central City and Ord to help farmers understand their obligation in forward contracts for grain.

The meetings were scheduled because of what Agriculture Director Greg Ibach described as “the large turnout of producers” at a similar event in Albion in December.

Lincoln attorney Mossman said, even though farmers appear to be on solid ground right now in their contracts at Plainview, that could change.

“The only hammer that the company would have would be a bankruptcy filing, assuming the contracts are valid.”

Reach Art Hovey at 473-7223 or ahovey@journalstar.com.