For the first time in 25 years, Minnesota farmer Dean Tofteland has missed his deadline to buy seed for next spring's corn and soybean crops.
With $200,000 of his money yet to be returned from the accounts of MF Global, his former broker, the 49-year-old farmer has missed a $5,000 discount for early buyers, and is watching friends and neighbors snap up the best varieties of seeds.
In the latest sign of how MF Global's failure is continuing to cascade across the commodity industry, Tofteland and other farmers who have yet to recover more than a third of their money from the bankrupt broker now find themselves in a cash crunch that risks rippling far beyond the futures market.
Some farmers have had to postpone purchases of land or equipment. Tofteland still expects to sow his 1,000 acres in the southwest corner of the state, but may have to borrow money to do so.
Still, the delay in returning billions of dollars in customer funds more than a month after MF Global filed for bankruptcy is starting to affect actual decisions on the farm. This threatens to cloud the outlook for U.S. crops, warn farmers who have been ratcheting up pressure on the bankruptcy trustee to move faster to disperse any cash he secures.
"That's pretty serious when you're raising food for the country and the world," Tofteland said.
For most farmers, the fact that their broker may have taken as much as $1.2 billion of customer money for its own use is bad enough. But the seasonal business of farming is now being disrupted since regulators still can't account for the missing funds, or even agree how big the hole is.
The chief regulatory officer for CME Group said on Tuesday the exchange was confident after more investigations that some of the higher estimates of the shortfall in MF Global customer funds were inflated. CME was MF Global's main regulator at the exchange level.
"The amount of money that we have tied up is significant," Tofteland said. "Because of this I've been delaying my seed purchase decisions."
Tofteland normally would have made his purchases at least two weeks ago to take advantage of discounts for farmers who buy early. He has avoided borrowing money in order to do so because he does not want to take on more debt but says he will consider a loan if the delay persists.
Tofteland worries his harvest next fall will suffer because the best-performing types of seeds will likely be sold out by the time he makes his purchases. He still plans to plant his crop in the spring.
Farmers are among the thousands of former MF Global clients who are missing money from the brokerage. The firm run by former New Jersey Governor Jon Corzine, an ex-CEO of Goldman Sachs, collapsed on Oct. 31 after making bad bets on European debt.
The bankruptcy had an immediate impact on farmers' abilities to hedge their crops at grain exchanges. Many had to liquidate positions or put up additional cash to meet margin calls after their accounts were transferred from MF Global to other brokerages.
Now, the collapse has begun to impact farm decisions that can directly affect output.
In Montana, Marty Klinker, who grows wheat and barley, is missing about $275,000 from his accounts at MF Global. He said the shortfall caused him to delay buying more than $500,000 worth of farm equipment, including a tractor and combine, from manufacturer Case IH.
Klinker didn't know whether he would eventually buy the equipment, which would replace older models on his farm. He said he has to decide by the end of the year to take advantage of prices he previously negotiated with the company.
Case is a brand of CNH, a majority-owned subsidiary of Italy's Fiat SpA. A Case spokesman did not respond to a request for comment.
"We're right in the middle of year-end equipment decisions," Klinker said.
FARMERS CAUGHT OFF GUARD
MF Global's collapse has not completely halted farm purchases.
Stine Seed, which calls itself the largest independent U.S. seed company, has not seen a slowdown in sales, said Myron Stine, vice president of sales and marketing.
Yet, other agribusiness professionals confirm shockwaves from the bankruptcy have disrupted plans affecting crop production.
Diana Klemme, a broker for Midwest grain elevators and vice president of Grain Service Corp in Atlanta, said one of her clients was holding about $400,000 cash in an MF Global account at the time of its collapse. The client had to delay purchasing some land because the money had been frozen, she said.
Farmers were caught off guard by the disappearance of their money because it was held in segregated accounts considered to be immune from troubles at brokerages. Several farmers said they had felt it was safer to keep cash in the accounts than at local banks.
Congress is holding a series of hearings to examine whether regulators and company insiders could have done more to prevent MF Global's failure from hurting farmers and investors.
At a Senate Banking Committee hearing on Tuesday, Senator Richard Shelby criticized the Commodity Futures Trading Commission's handling of the meltdown, saying he thought former clients of MF Global "deserve better".
Farmers worry the cost of doing business could go up permanently due to the increased risk of keeping money in segregated accounts, making it more expensive to produce crops. For Klinker, whose oldest son is entering the family business, that could mean upgrading equipment less frequently than he has in the past.
"It impacts everything," he said.
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