An Oregon oilseed crusher claims to have lost nearly $4 million in expected revenues after a major national agribusiness company allegedly backed out of a deal.
Willamette Biomass Processors of Rickreall, Ore., has filed a lawsuit accusing Perdue Agribusiness, headquartered in Salisbury, Md., of breaching a contract to supply organic soybeans for crushing.
According to the complaint, Willamette Biomass Processors had a “toll processing agreement” under which it was paid to crush Perdue’s soybeans into oil and meal between 2015 and 2017.
Before the deal expired, Perdue officials said they wouldn’t renew the tolling agreement but still wanted to do business with Willamette Biomass Processors at a reduced volume, the complaint said.
Based on that commitment, the oilseed crusher renewed its property lease for five years at a cost of nearly $650,000 and spent more than $260,000 on equipment upgrades.
The company had expected to earn nearly $800,000 annually in revenues over five years from crushing Perdue’s soybeans, which represented “roughly half” of its sales volume.
Despite knowing about the “irrevocable steps” taken by Willamette Biomass Processors, Perdue “reversed course and repudiated the agreement,” the complaint.
As a result, Willamette Biomass Processors has “suffered a dramatic downturn in its business fortunes,” with losses of about $480,000 in 2018 and $250,000 so far this year, the complaint said.
The lawsuit alleges that Perdue’s breach of contract makes the company liable for $5.6 million in damages sustained by Willamette Biomass Processors.
Under an alternative “promissory estoppel” claim seeking $1.6 million, Willamette Biomass Processors argues that it’s owed damages because Perdue broke a promise despite knowing about the lease and equipment investments.
An attorney representing Perdue Agribusiness in the case did not respond to requests for comment. In court documents, the company argues the dispute must be sent to arbitration.
The fate of Willamette Valley Processors is of concern to canola farmers who can deliver their crops to that facility instead of shipping the oilseeds to more distant out-of-state processors.
“They’re the only local processor,” said Anna Scharf, president of the Willamette Valley Oilseed Producers Association. “Any time you truck something, it adds cost.”
Scharf said the lawsuit’s disclosure that Willamette Biomass Processors had been losing money the past two years is “very concerning,” since most farmers haven’t yet been paid for the 2019 canola crop.
The company explained the delayed payment was related to its new ownership, she said.
Growers nonetheless delivered their canola to the facility because storing canola on-farm isn’t possible due to the crop’s flammability and because bins designed for cereal grains are too permeable for the tiny seeds, she said.
While Willamette Biomass Processors usually paid immediately for canola, the storage arrangement would allow them to hedge on the commodity market for canola, Scharf said.
Jeremy Zuidema, the company’s new owner, said he expects farmers will be paid for the 2019 crop by mid-December, once the oil crusher’s accounting system is reconciled with his own.
Zuidema also owns a trucking company, a truck repair company and a grain company that do business with farmers, he said.
Since taking over Willamette Biomass Processors in August, it’s been “challenging” to find replacement business for the lost Perdue contract, Zuidema said.
However, the company may install oil refining equipment that would “help tremendously” in acquiring new customers, since crude oil would no longer have to be transported to Iowa or Southern California for further processing, he said.
The oilseed crushing company will remain operational, though that may mean moving its equipment to another of Zuidema’s businesses to save on lease payments, he said.
Over time, the company may expand to crush more flax and meadowfoam, Zuidema said.
“We have connections with companies that want non-GMO products like those we’re producing in the valley,” he said, referring to crops that aren’t genetically modified organisms. “I think there’s going to be a lot of opportunity.”