But Armstrong’s efforts in Arizona on behalf of the 9320 would be wasted. As the very first 9320s started down the assembly line, combine production at White ground to a halt. The company declared bankruptcy. But it still had a very desirable asset: a marketable rotary combine.

How did that combine come to be — and what happened to it?

WHY IT MATTERS: In this article, Scott tells a fascinating story of harvester research and development, much of which took place in secret up here in Canada, showing how even the best ideas could fall victim to quirks of timing and circumstance.

New Holland would be the first to market a rotary combine, the TR70, in 1975 — but all farm machinery brands were working on and/or trying to develop the concept.

After the TR70 debuted, no longer was trying to create a rotary combine just an interesting R&D project for other brands. It became an urgent objective if they were to stay competitive in the harvester marketplace — and the clock was now ticking.

“The whole combine industry changed,” says Doug Voss, a former engineer with White, who worked through that period.

Engineers there had started White’s rotary development project back when the company was known as Cockshutt, long before that brand merged with U.S.-based Oliver and Minneapolis-Moline to form White Farm Equipment in the early 1960s.

“The rotary concept was the brainwave of Don McNeil, who was our chief engineer,” says Herb Hagglund, a former field engineer at White’s Cockshutt facility at Brantford, Ont. “He came from Massey. He and another fellow at Massey — who ended up at International — had tossed the idea around before he came to us at Cockshutt in 1953 or ’54. We started this thing (the rotary development project) in September of 1966.”

Given that IH started a rotary project about the same time, it’s interesting to speculate whether the other engineer from Massey-Harris-Ferguson who went to IH had a hand in that.

The garage band

Once White’s rotary development project was approved, all work on it became top secret — so secret, in fact, the small staff assigned to work on it was moved out of the company’s main engineering facility to a rented workshop. That kept the project as invisible as possible.

“They rented what was originally an Esso service station,” remembers Hagglund. “It had two bays and a bit of an office. We just had the barest of essentials as far as fabrication is concerned. I was in charge of the overall project at that time.”

To help Hagglund, two fabricators and a draftsman were pulled from the main engineering section to make up the team working out of the old service station. A service trailer loaded with tools, used by engineers for field repairs, was hauled up to the garage to give the small crew access to welders and a variety of other essentials.

Although they were essentially working on their own, the team was also getting some R&D support from the Ontario Research Foundation (ORF), which was funded jointly by an industry association and government grants. It helped the small, garage-based research team by doing some testing and development in its lab.

Roy Gullickson, a combine engineer, was recruited away from Massey Ferguson by the ORF to bring expertise in harvester design to its staff. And he was given the job of heading ORF’s efforts on the rotary development project.

“The ORF was involved in a contract with Cockshutt (White) Farm Equipment to take a look the possibilities of having a combine harvester more suited to corn and soybeans, but also suited to cereal grains and oilseeds,” he explains. “That sounded interesting to me.”

To begin evaluating potential rotor designs, long before NH introduced the TR70, Gullickson took a look at the only existing rotary technology on the market at that time, used in stationary corn shellers.

“We bought a small, stationary corn thresher you could drive with the belt pulley of a tractor and you could shovel corn ears into it,” he continues. “The rotor itself was only about six or eight inches in diameter. We did quite a bit of testing on kernel damage and threshing efficiency in a lab that was set up for that purpose in the ORF building.”

Playing by ear

To have corn on hand for testing year-round meant the team members had to leave their workshops, go out into cornfields and hand-pick ears for their stockpile.

“We gathered corn ears in the field,” Gullickson says. “The guys from Cockshutt helped with that and we put the ears into cold storage until we were ready to use them.”

Because he’d contributed so much to the overall project, management at White decided to bring Gullickson into its own fold. He was hired away from the ORF to be a full-time member of the rotary development team.

“Roy worked on the (rotary) concept for about three years before he came to us, and then we moved everything into our own facilities,” Hagglund says. “That became our basic crew: two fabricators, a draftsman, Roy and myself.”

As work continued, accommodations in the old service station were becoming cramped. Development of the rotary moved beyond building and operating stationary test rigs to creating a field-scale prototype.

“We were in touch with Cockshutt all the time and Don McNeil, who was chief engineer and vice-president of engineering at the time,” says Gullickson. “He decided he wanted to do a full-size test rig. We did that at Cockshutt using a conventional harvester. In 1967 we took the cylinder, beater and straw walker out of it.” That prototype became known as the R1.

“We brought up a 535 (combine), which was a production machine,” Hagglund recalls. “We brought it up and stripped it out, took everything out of the inside. All we had left was a frame, drivetrain and engine. We took what Roy came up with, the thresher and separator part, and fabricated it in our shop. We used part of our central engineering facility to make parts.” The new rotary thresher and separation system were then installed into the 535.

But even though the team had to work on the prototype outside of its old service-station workshop, the company still wanted to keep a veil of secrecy over its progress.

“One of the contractors we had to make parts was making the rotor, which was fairly substantial and heavy,” says Hagglund. “He asked us what we were making, and I told him it was a cement mixer.”

To make for a simple installation, the rotor was attached directly to the feeder house. When the header was raised, the rotor tilted in unison with it. The pivot point between the feeder house and rotor was the 535’s existing feeder house mounts. There was no threshing advantage to this arrangement, it just made converting the combine to a rotary thresher a simpler process.

“We tied the corn head to the threshing and separating part,” says Hagglund. “It pivoted on a central pivot. That’s how we got the corn head to move up and down. We took it out into the field in mid-January to do corn.”

“The first rotor was about 24 inches in diameter,” says Gullickson. “It ran from one end of the combine to the other.”

Field goals

By the beginning of January the improvised prototype was ready for its first field trial, after being fitted with a two-row Oliver corn head.

But the team had been working on much more than just moving from a conventional, tangential threshing cylinder to an axial rotary design: the initial R1 prototype also included an entirely new vertical cleaning system. Grain was lifted up inside the combine body and fell through an upward airflow inside a rotating chamber that used centrifugal force to improve cleaning.

“The overall idea was we were trying to make a machine that was cheaper and easier to manufacture, because it had less parts,” Hagglund says. “By going vertical with the cleaning unit, we could harvest uphill, downhill or sidehill without any detriment to the cleaning.”

The method initially used to get material into the rotor was unconventional as well. “We started off with an air fan feeding material from the table to the rotor, but that didn’t work out well,” remembers Gullickson. “But the results doing corn, as I recall, were fairly satisfactory overall. So we decided to do a new combine design with the rotor part of the fixed structure of the combine.”

After the initial work in the field with corn, the engineers decided the second-generation prototype needed to be tested in cereal grains as well. To make the necessary changes to the prototype for that, White rented another, larger building in Brantford, and the small team moved from the old service station to the much bigger accommodations.

“We moved three times in the space of two years,” says Hagglund. “We didn’t allow anybody in unless they definitely had some reason for being there. We tried to keep it as quiet as we could.”

With the changeover to a grain header and the rotor fixed in place so it no longer moved in conjunction with the feeder house, the remodelled prototype, now designated the R1A, was ready for field work by mid-May of 1967. Then the team hit the road to Crystal City, Texas, to start field trials in cereal grains. Oats was the first small grain to be put through it. In 1968 another updated prototype, the R2A, was built on the 535 chassis and field tested.

Once the modified 535 combine had served its purpose as an initial test bed, it was time for a ground-up build to incorporate new and better design elements. Working out of its third rented location, the engineering team created an entirely new combine prototype in 1969. Designated the DE-1, it threshed with a 24-inch diameter rotor, took power from a Chrysler 440, V-8 engine connected to a hydrostatic traction drive and relied on a variable-speed belt to drive the rotor.

“The DE-1 was a totally new concept from the ground up,” says Hagglund. “Everything was built by hand.” By 1970 it was in the field.

The vertical cleaning system was also built into the initial DE-1 prototype, along with the rotary threshing system — but because the vertical cleaning system’s design had so many problems, it was eventually abandoned in favour of a conventional one. “We kept working on it,” says Hagglund. “The big problem with it was to make it adjustable and have it convenient to adjust. Cleaning is a very complicated game.”

Despite the fact the rotary team was making good progress, financial concerns at White necessitated belt-tightening measures that disbanded it in 1971. Both Hagglund and Gullickson left the company as a result. “People went in all different directions,” Hagglund remembers.

Regrouping

About a year later, management at White managed to stabilize the company’s finances and reallocate enough funding to the engineering department to restart the rotary project. But with the original engineers Hagglund and Gullickson gone, replacements had to come from the remaining staff.

Murray Mills was one of those selected to pick up where Hagglund and Gullickson left off. “I was working mostly on the conventional combines at that time,” Mills recalls. “We had the two groups within the combine engineering department, the small group on the rotary, originally, and the full-scale development on the conventional side as well.”

With new hands on the project, the top-secret approach gave way to a more inclusive effort after the restart in the early 1970s. “We started sharing (the work),” says Mills. “The way White’s engineering was at that time was there was an engineer in charge of engines, one in charge of frames and that sort of thing. There would be one engineer in charge of that (rotary) project, but he would have access to engineers in all the other groups.” That meant development of the rotary was now very much the combined efforts of the whole group of engineers.

That group did, however, reap the benefits of the major accomplishments from Hagglund and Gullickson: mainly, how they overcame much of the difficulty encountered in getting tough crop to feed into the rotor properly — a problem that lingered with the other brands’ designs, even after they began commercial production.

The secret to the White design was to add a beater in front of the rotor inlet to accelerate the speed of the crop mat as it came out of the feeder house — a system for which John Deere eventually purchased the patent, Mills says, and continued using a version of it on its combines.

Room for improvements

Once the NH and IH rotary combines hit the market, White’s engineering staff wanted to take a look at those designs, so the company purchased one of the first IH rotary combines and leased a NH to evaluate their performance.

Getting material to feed into the rotor and getting good straw distribution at the back of the combines were two areas where White engineers saw they could improve over those designs. Fortunately, they already knew how to get tough crop to feed in, thanks to Hagglund and Gullickson.

“Probably the two biggest things were the feeding and then the discharge from the rear end to make sure you get even distribution,” says Mills. “We changed the shape of the discharge at the back to get a decent spread of the material.”

The White engineers “developed a computer model and did a lot of work on the design of the rotor,” he says. “They were trying to move material with the rotor rather than with the guide vanes. It was almost like an auger, moving material with the rotor. That was never very satisfactory in a lot of crops. It was when they developed the guide vanes that things really started to look good. The original rotor looked like an auger with threshing elements on it.”

The computer modelling and the evaluations of competitors’ machines provided new insight for refinements to the rotor design.

“When New Holland introduced their rotary, it changed the direction we were going in, substantially,” says Voss. “We were working on an auger-flighting concept for a rotor. NH introduced longitudinal-type elements on the rotor and helical guide vanes.” The team at White realized it had to go in a similar direction as well.

With the final engineering obstacles overcome on the rotor, engineers were getting close to a marketable design — and that pleased White’s management, who saw rotaries as the way of the future. Even though a large, conventional prototype combine with a 60-inch cylinder, the model 9800, was nearly ready for production, management decided to abandon it. The weight of importance had shifted from conventional combine development to rotary.

“The decision was made to go with the rotary rather than a big conventional,” Mills remembers. “That basically stopped all development work on the big conventional under development at the time, because it was thought at that time that (the rotary) was the way things were going to go.”

“The original objective of the (rotary) project was to come up with a high-capacity combine, using technology that was different than what had been in use at that time.” adds Voss. “As a result it was a very demanding and huge project.”

Conventional cleaning

Another of the engineering casualties was the vertical cleaning system pioneered by Hagglund and Gullickson. “They had the idea they could go rotary on everything,” says Mills. “The cleaning system they were using was basically rotary as well. It was a vertical drum that was rotating. They tried to use centrifugal force to separate out the chaff. You could develop it to work well in one crop. The problem was, you couldn’t adjust it to change between crops. Screens on the vertical sections had to be changed. You couldn’t use the same screens in corn and wheat.”

So, the first White rotary combine would have to borrow its cleaning system design from the conventional models.

“There was a lot of energy expended on developing the new cleaning system,” recalls Voss. “We had to stop that when NH came out with the TR70. In hindsight, I think it slowed down the rotary development. It was too large a task for the number of people involved and the size of the department.

The first high-capacity prototype to be built using the modified rotor design combined with a conventional cleaning system was the HC-1. The rotor in the HC-1 was larger than previous prototypes, it grew to 80 cm in diameter and its length was extended. It was also the first prototype to use a rotor incorporating guide vane technology.

After further refinements, the HC-1 prototype morphed into the HC-2, which became the production version of the 9700. There were other HC prototypes as well. The HC-4 would become the smaller-framed 9320.

When all the research work was done and the threshing system design was market-ready, White originally intended to create three different-sized, self-propelled machines. The largest model, the class VI, 9700, would be built with the 80-cm, long-length rotor. A mid-sized, class-V 9400 (which was to get the designation 9520 for production) would get a smaller-diameter rotor the same length as the 9700s. And the 9100 (which would form the basis of the production 9320) was to get a shorter, 70-cm diameter rotor.

“We built two or three 9400s,” says Mills. “They were built experimentally but never put into production. There was nothing significant about it (in performance over the 9320) to give it any advantage. It shared the same body as the 9320. The 9320 was the simplest design. It had the fewest drive assemblies.”

Concluded and rebooted

In 1979 White began rotary combine production in Brantford, starting with the 9700. After some initial “clean-up” refinements, the 9700 was renumbered the 9720 in 1984.

But the financial situation for farm machinery manufacturers had become very difficult by the end of the 1970s. Low commodity prices and declining farm incomes in North America led to a sudden and significant drop in demand for combines.

White was placed in bankruptcy protection in September of 1980 and ceased operations five years later. The very first 9320s were just starting down the assembly line the day production was stopped.

Massey Ferguson purchased the White rotary designs from the bankruptcy receiver, giving it ownership of all the completed 9720s, any incomplete models on the assembly line including the 9320s, the parts stores and all the tooling required to build them.

Production of the 9700s then moved across Brantford to the MF facility. The 9320 Whites eventually made it all the way down the assembly line there wearing MF 8560 decals, while the larger 9700s were rebadged as the MF 8590.

Eleven years after serious engineering work began on creating a rotary combine at White, engineers finally saw their efforts begin to pay off with the model 9700s, which had the largest capacity of any rotary machine on the North American market when they entered production in 1979.

Unfortunately, the company would not last long enough to gain the full benefit of the efforts its engineers put into creating the new machines.

“For its time, the 9700 was a good combine,” Voss says. “It kind of pioneered the high-capacity direction machines have been forced to go in.”

CORRECTION, Jan. 23, 2026: The caption on the photo up top of Murray Mills and Neil Armstrong, as it appeared in the Dec. 31, 2025 print edition of Grainews, incorrectly identified Neil Armstrong as engineer Don McNeil of Cockshutt. The caption has been corrected here online.

Editor Dave Bedard — who really should have been able to identify Neil Armstrong in a photo — wrote the incorrect caption. He regrets the error and apologizes to Scott and to readers of the December print edition. – Dave B.

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In court documents, receiver PricewaterhouseCoopers said that as of April 29 it had entered an asset sale purchase agreement with a Manitoba numbered company. It has requested court approval for the sale of the plant and property.

The receiver asked the court to seal documents related to the value of the agreement until the sale was closed.

Merit Functional Foods Corp was a joint venture between Vancouver plant-based protein firm Burcon NutraScience, agri-food giant Bunge and former executives of Hemp Oil Canada.

It ran into financial trouble in 2022 and entered receivership in early 2023. At the time the company owed about $58.5 million to Export Development Canada and about $36.5 million to Farm Credit Canada.

Burcon NutraScience in April 2023 said it and an unnamed partner had put in a bid for the Winnipeg plant and hoped to restart operations.

Court documents show the receiver got an offer on the site in the summer of 2023 but wasn’t able to reach a purchase agreement.

“Several discussions and negotiations took place between the Receiver and other interested parties; however, none resulted in a successful transaction,” the documents say.

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He delivered the grain before both companies declared bankruptcy, leaving him short C$165,000 they owed. Now Prybylski has no money to replace his old tractor.

Hundreds of Canadian farmers have received delayed payments for their crops or not been paid at all, as a growing number of grain-buying firms declare bankruptcy amid drought and low commodity prices, according to interviews with dozens of farmers, a government agency, and a review of bankruptcy documents.

Farmers are discovering they are not necessarily protected from the failures, revealing holes in Canada’s farm safety net.

The bankruptcies are adding to farmer troubles in Canada, the world’s top canola and No. 3 wheat producer, while they also brace for tariffs from the United States.

Prybylski, who farms in Willowbrook, Saskatchewan, is relying on a line of credit to cover the shortfall until he harvests the next crop in autumn.

“Where do we cut our expenses? Or how do we get more revenues to do the things we need to do?” Prybylski asked. As planting season approaches, he needs to buy fertilizer, seed and fuel.

Farmers can sell crops to companies that operate storage terminals, merchants and other farmers who fatten livestock. They are generally paid a few weeks after they deliver grain and have long incurred most of their costs, a problem for those who deliver to a buyer that goes broke before paying.

Canadian farmers have some financial protection through the federal government-run Canadian Grain Commission, which regulates crop transactions, oversees grain company failures and at times covers some of what farmers are owed by failed companies. The CGC pays compensation from bonds and other security that licensed companies are required to post.

The CGC managed four company failures in 2024, compared to zero or one most years, and the most since at least 2001, according to government data.

But some unlicensed companies have also failed, suggesting the troubles may be broader.

Farmer Christi Friesen said grain buyer Agfinity tried to delay paying her for three loads of peas, though it ultimately paid the C$75,000 it owed plus interest.

Agfinity declared bankruptcy on November 25.

“I needed to fight,” said Friesen, who farms 5,000 acres (2,023 hectares) of cropland in Alberta’s Peace region. “I kept being a pain in the ass.”

Discovering that some failing companies, such as Agfinity, are unlicensed, has alarmed farmers, as has finding out that some licensed companies are not fully insured.

The situation “has fully exposed that we are not secure,” said southern Saskatchewan farmer Cherilyn Jolly-Nagel.

Companies directly buying crops from farmers must, by law, be licensed with the CGC, with few exceptions. For legal enforcement, the agency must complain to the Public Prosecution Service of Canada, which then decides whether to take action.

The CGC has not made such a complaint in at least seven years, said spokesperson Christianne Hacault.

Other flaws in farmer protections are the CGC’s requirement that farmers report non-payment within 90 days, and licensed firms who fail to post adequate security, farmers say.

The CGC is holding consultations with farmers about its protection system, Hacault said.

“We know there are gaps.”

The federal agriculture minister’s office, which oversees the CGC, did not respond to a request for comment.

Agfinity owner Joseph Billett told Reuters that reduced sales due to smaller crops, farmers’ reluctance to sell at low prices and competition from imports of U.S. corn to feed cattle pushed the company over the edge.

“These three factors made profitability very challenging, and for us, impossible, these past few years,” Billett said.

Dust bowl

Farmers in the western half of Canada’s Prairies have grown stunted crops for four years due to dry conditions. In some places, farmers say they are facing the worst prolonged drought since the 1930s Dust Bowl.

Crop insurance claims between 2021 and 2024 shot up seven-fold compared to the previous four-year period due to drought-damaged crops, according to agencies in Alberta and Saskatchewan.

Numerous small grain companies, brokers and merchants are among Canadian crop buyers, unlike some countries that are dominated by global players.

In the United States, farmers also had low prices to deal with, but their crops had better growing conditions, allowing them to salvage revenue. Some states regulate grain companies so that farmers have protection against non-payment, but the situation varies state-to-state.

In Canada, some companies have avoided bankruptcy, but are still struggling.

Farmer-built North West Terminal in Unity, Saskatchewan, said in September it would stop buying grain at least through July to avoid losses.

In an interview, NWT CEO Jason Skinner said intense competition to buy reduced crops hit his company, though it has avoided bankruptcy.

“We’ve seen some significant headwinds and . . . margins that aren’t covering costs,” Skinner said.

In May, LSM Grain picked up two truckloads of red lentils, worth about C$50,000, from Saskatchewan farmer Kelly Arthurs, but did not pay him. The CGC revoked LSM’s license in July.

The company could not be reached for comment.

Arthurs complained to the CGC within 90 days of delivering his grain and was eventually compensated.

But 17 farmers owed a combined $842,000 by LSM waited too long and will not qualify for compensation, according to a bankruptcy document and the CGC. Prybylski is one of them.

Global Foods and Ingredients also went broke owing Prybylski money in the spring. He submitted his complaint in time to qualify for coverage, but only received 75 per cent of what he was owed because Global had posted insufficient security.

A law firm representing Global Foods did not respond to a request for comment.

Arthurs said he felt so much stress from months of fighting to get paid that he may quit farming.

“It’s time to retire.”

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The company owes $5.067 million to the 181 creditors listed in bankruptcy filings released Nov. 26. Many of the creditors are farmers who sold grain through Agfinity but were never paid. Employees out their last paycheques are also listed in the filing. Listed assets totalled $162,593.

MNP Ltd. has been appointed as the Licensed Insolvency Trustee. Creditors can contact MNP to complete a proof of claim prior to a meeting of creditors scheduled to take place via teleconference on Dec. 16. The meeting is a formality in the bankruptcy process, with the purpose of affirming the trustee’s appointment, appointing inspectors to the bankrupt estate and providing direction to the trustee.

While Agfinity had once operated as a typical grain broker — matching buyers and sellers through broker notes but never handling any money directly aside from their fee — in recent years the company began using grain purchase contracts where they took the payment from the buyer and paid the seller later. In a July blog post, Agfinity’s president Joseph Billett said the newer contracts were necessary to support cash flow due to narrow margins. However, the company was unable to generate enough trade volumes to match costs.

In a draft letter to be sent to creditors provided by Billett, he acknowledged mistakes made over the past year and offered “sincerest apologies for the pain and stress this situation has caused.”

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Agfinity, the Stony Plain, Alta. grain broker that Kitt sold his canola through, laid off employees and started the process of declaring bankruptcy in mid-October, according to former employees. The Agfinity website has switched to maintenance mode, its social media accounts are shuttered and calls go straight to voicemail.

“We were told (on Oct. 18) that they would be filing for bankruptcy that next Monday (Oct. 21) and that as employees we could expect to hear from a trustee who was going to give us paperwork to fill out to ensure we were paid for our last few weeks of work,” said Coco Dougherty, Agfinity’s former vice president of marketing and communications. However, Dougherty and other former staff contacted for this article had not received their final paycheques as of mid-November and were still waiting to be contacted by the bankruptcy trustee.

The company has not yet officially filed for bankruptcy, but “it should be any day now,” said Agfinity president Joseph Billett via email Nov. 19. In a draft letter to be sent to farmers owed money by the company, Billett acknowledged mistakes made over the past year and offered “sincerest apologies for the pain and stress this situation has caused.”

Kitt was out about $20,000 for his heated canola. Christi Friesen, a northern Alberta grain farmer who has been active on social media connecting farmers and shedding light on Agfinity’s non-payment issues said there are many others in the same position.

Graham Letts bought grain through Agfinity on several occasions over the years for his Westlock, Alta. livestock operation and appreciated the ease of the company’s online system. However, he noticed a change in recent years. While Agfinity had once operated as a typical grain broker — matching buyers and sellers through broker notes but never handling any money directly aside from their fee — the company started using new grain purchase contracts where they took the payment from the buyer and paid the seller at a later date. Letts recounted a situation where he bought grain and paid Agfinity the full amount, only to later hear that the farmer who made the delivery was never paid.

In a July blog post, Billett said the grain purchase contracts were necessary to support cash flow due to narrow margins. However, the company was unable to generate enough trade volumes to match costs. At the time Billett acknowledged Agfinity’s late payments and tarnished reputation, while also saying that grain purchase contracts would remain a necessary part of the business as it worked to overcome its financial difficulties.

With Agfinity headed to bankruptcy, it’s uncertain when farmers still owed money will be paid, if ever, especially as the company was never licensed through the Canadian Grain Commission.

Dougherty and two other former employees are working at launching a new brokerage firm, Grain Gateway Canada, but have run into some strangeness online.

Social media accounts and a website claiming to be Grain Gateway Canada briefly sprung up in early November before disappearing. A test version of the Agfinity buyers’ hub website was altered to show a Grain Gateway Canada logo and appeared to link the two companies. There were also reports of phone calls to farmers from people claiming to be with the new company.

Dougherty acknowledged Grain Gateway Canada would likely “wear the scarlet letter” of their past association with Agfinity but was adamant that there was no relationship between the companies. She was unsure why someone would be impersonating her fledgling company or attempting to link it to Agfinity but had documentation to back up Grain Gateway Canada’s independence.

“We feel that somebody is going out of their way to make it look like we’re doing something corrupt … and it’s just so disheartening,” said Dougherty, adding “it’s creating chaos, and panic and mistruths.”

—Updated Nov. 19 to include comments from Agfinity president Joseph Billet, updates throughout.

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The company, owned by private equity firm Paine Schwartz Partners, has about $679 million in debt, and plans to sell its business in bankruptcy, according to bankruptcy court documents (all figures US$).

Prima grows peaches, nectarines, plums and apricots on its 18,000 acres of farmland in California’s San Joaquin Valley.

Prima has struggled under its high debt load, and it has also faced significant setbacks since 2020, including a salmonella outbreak that led to a recall of peaches in the U.S. and the 2020 Creek Fire in California, which damaged orchards and reduced crop yields and quality.

Prima will try to find a buyer for its assets by November, hoping to avoid an upcoming cash crunch between its profitable harvest seasons. Prima has about $26 million in cash, and it could run out of money by January 2024 if it doesn’t find a buyer before next year’s harvest season begins in May, according to court documents.

If no buyer emerges, Prima will pivot to a debt restructuring or a liquidation of its business, according to court documents.

The company was formed from a 2019 merger of Gerawan Farming Inc. and Wawona Packing Company. The company had over $300 million in sales revenue in 2022, with 60 per cent of that coming from sale of peaches, according to court documents.

— Dietrich Knauth reports on U.S. bankruptcy and product liability law for Reuters from New York City.

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The CGC on Tuesday announced the results of its review of producer claims in the wake of last July’s bankruptcy filing by Pipeline Foods, whose footprint in Canada included two small southern Saskatchewan grain elevators and a Winnipeg office.

The commission’s review found 49 eligible claims for unpaid deliveries, for which the CGC said Tuesday it will pay out compensation of over $2.2 million from the security posted by Pipeline’s Canadian subsidiary.

Pipeline filed for bankruptcy in Delaware last July 8 and suspended its purchases of grain from Canadian growers effective July 9. It sought another petition July 12 to extend creditor protection to cover its subsidiaries, including the Canadian business.

The company said in a release in July that it decided a Chapter 11 bankruptcy reorganization “provides the best means to support its operations and to continue the process of selling the company in order to preserve company value and jobs.”

Pipeline said it “regret(s) the hardship this may present to our creditors, including farmers, producers and vendors and we hope we can work through issues together, in due time, with the least amount of disruption.”

Pipeline had bought its two Saskatchewan elevators in 2017: the former Mainline Terminal facility at Wapella, about 130 km south of Yorkton, and the Gull Lake Grain Corp. site at Gull Lake, about 50 km southwest of Swift Current. The elevators have capacity to handle 3,500 and 4,000 tonnes of grain respectively.

The company had just got rolling earlier in 2017 with backing from players including New York agribusiness investment firm Amerra Capital Management. The new company had planned to store, screen and blend organic and non-GMO grains including barley, corn, rye, flax, lentils, oats, peas, soybeans and wheat at the two elevators.

Pipeline, which had also set up a South American regional office in Buenos Aires, said in 2017 it was “pursuing opportunities” to invest $300 million to $500 million over the next three to five years “to build a better, more sustainable supply chain in agriculture.”

As a condition of licensing, CGC-licensed grain companies in Canada must tender security for outstanding grain liabilities to producers, in the form of a bond, letter of credit, letter of guarantee or payables insurance.

If a CGC-licensed company doesn’t meet its payment obligations, the commission then uses that posted security to compensate eligible producers. — Glacier FarmMedia Network

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Judge Shawn Smith of Court of Queen’s Bench in Saskatoon on Friday approved the sale of Morris to a numbered-company arm of Superior Farms Solutions Ltd. (SFSL), the operator of Rite Way Manufacturing. The numbered company will operate as “Morris Equipment.”

The deal will see Morris’ Saskatoon head office, its Minnedosa, Man. manufacturing plant and its patents and related intellectual property go to Rite Way. The deal’s financial terms and dollar amounts are redacted in court documents posted online.

Rite Way and Morris’ court-appointed monitor have agreed to target a closing date of Dec. 31 for the deal.

In its report to the court on Dec. 11, Alvarez and Marsal, the monitor for Morris, described the deal as “the culmination of all of the efforts and resources expended by Morris Group and its stakeholders over the course of the last 12 months.”

If approved and completed, the monitor said, the deal “will preserve the core components of the 90-year-old farm equipment manufacturing enterprise carried on by Morris Group (and its predecessors) continuously from the 1920s until the present date.”

However, in its “exhaustive sale process” to find an investor or buyer for Morris, “no party had expressed to the monitor an intention to purchase, acquire or operate the Yorkton plant,” the monitor said.

The deal as reached means the Yorkton plant will close down when the deal is completed, officially putting the plant’s 20 remaining employees and another 50 laid-off employees out of work.

Without a letter of understanding, as was reached earlier this year between the company and the Yorkton plant’s union, the plant’s collective bargaining agreement would have required any buyer to “take on a degree of labour relations risk for their existing business operations” even if it didn’t buy the Yorkton facility.

The Yorkton plant’s workers, members of the Retail, Wholesale and Department Store Union Local 955, approved the terms of the letter in August in a vote at an open-air meeting at a Yorkton baseball diamond.

The exact contents of the letter were kept confidential in the monitor’s Dec. 11 report. It calls for creation of a fund to manage payments to Yorkton plant employees “whose employment is anticipated to be terminated.”

The importance of the letter of understanding to the deal “on which the survival of this business enterprise is based cannot be overstated,” Alvarez and Marsal wrote in its report.

BMO, which as Morris’ principal secured creditor is owed about $25 million, has said it supports the proposed sale but also now plans to file for an application-for-bankruptcy order against Morris Group, likely to be heard in court next month.

A bankruptcy would see the employment terminated for Morris’ Saskatoon and Minnedosa staff but, as the monitor’s report puts it, “reasonable prospects exist” for those staff to get employment with the new owner.

Operating in creditor protection since January this year, Morris’ businesses include manufacturing air carts, drills, seeders, harrow bars and bale carriers.

Founded in 1929 as Morris Rod-Weeder, the company was owned by the Morris family up until 2007, when it was sold to an ownership group led by then-CEO Casey Davis. Another ownership group, led by Ben Voss replacing Davis as CEO, took majority control in 2017.

Morris has operated a plant at Yorkton since 1949 and at Minnedosa since 1960, and went on to expand both plants several times. A company-owned dealership and service centre at Virden, Man. closed earlier this year.

Rite Way, founded by Regina machine shop owner Les Hulicsko, is today headquartered in Regina but has its main plant at Imperial, Sask., about 130 km north of the city. Hulicsko, who began building rock pickers in 1972, sold the business in 2012.

Apart from rock pickers and rock windrowers, Rite Way’s product lines today include land rollers, heavy harrows, rotary harrows, crimper rollers, bale carts, grapples and high-speed compact discs. — Glacier FarmMedia Network

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Calgary consultancy Alvarez and Marsal, the court-appointed monitor for Morris, said Tuesday in its latest report to Court of Queen’s Bench in Saskatoon it recommends approval of a sale and vesting order, clearing the way for Morris’ sale to Superior Farms Solutions Ltd. (SFSL), the operator of Rite Way Manufacturing.

The report also recommends Morris’ creditor protection, which has been in place since Jan. 8 with several extensions and otherwise expires Friday, be extended again to Nov. 30.

Alvarez and Marsal said it expects the “transactions contemplated” in the proposed deal to close on or before Nov. 15, and has “continued to work towards satisfying the remaining conditions” of asset purchase agreements (APAs) with SFSL for Morris.

The monitor said it believes it’s appropriate to seek a sale and vesting order now, since it’s working to address those outstanding conditions on or before Friday (Sept. 18). The APAs, it noted, have the approval of BMO, Morris’ largest secured creditor.

The APAs, Alvarez and Marsal said, “represent the highest and best offer received for the assets” of Morris, and a deal with Rite Way “would be more beneficial to (Morris’) creditors than a sale or disposition under a bankruptcy given the offers previously received.”

Remaining conditions for a deal include SFSL reaching an acceptable financing arrangement with its lender — and for Morris to negotiate an “acceptable arrangement” with the union representing employees at its Yorkton, Sask. manufacturing plant.

On the latter, Alvarez and Marsal said a letter of understanding between Morris and the Retail, Wholesale and Department Store Union Local 955 was drafted and submitted to union members. The membership then approved the terms of the letter on Aug. 26 in a vote at an open-air meeting at a Yorkton baseball diamond.

That letter proposes setting up a fund to manage payments to an unspecified number of Yorkton plant employees “whose employment is anticipated to be terminated” once the sale closes.

Further details weren’t available; the monitor has also asked Queen’s Bench to place the letter under confidential seal along with the proposed APAs.

Apart from its plant at Yorkton, Morris also has a plant at Minnedosa, Man. The Saskatoon-based company’s businesses include manufacturing air carts, drills, seeders, harrow bars and bale carriers.

Founded in 1929 as Morris Rod-Weeder, the company was owned by the Morris family up until 2007, when it was sold to an ownership group led by then-CEO Casey Davis. Another ownership group, led by Ben Voss replacing Davis as CEO, took majority control in 2017.

Apart from BMO, Morris’ secured creditors include Avrio, Kubota Canada, Wells Fargo and the financing arm of fabricating equipment maker Trumpf, among others. Unsecured creditors include Western Economic Diversification Canada and various trade vendors.

Rite Way, founded by Regina machine shop owner Les Hulicsko, is today headquartered in Regina but has its main plant at Imperial, Sask., about 130 km north of the city. Hulicsko, who began building rock pickers in 1972, sold the business in 2012.

Apart from rock pickers and rock windrowers, Rite Way’s product lines today include land rollers, heavy harrows, rotary harrows, crimper rollers, bale carts, grapples and high-speed compact discs. — Glacier FarmMedia Network

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Kruger had initially asked for a $2 million loan to build a grain elevator. But the Chicago-based bank, one of the largest U.S. farm lenders, ended up selling him a $5 million loan for the elevator and another $7 million to finance crops, machinery and debt consolidation, according to documents in the Ohio foreclosure case the bank filed to seize Kruger’s farm (all figures US$).

When Kruger offered to supply receipts of sold grain and other standard documentation, his loan officer told him not to bother. “‘Don’t worry. We’ll make the numbers work’,” Kruger, 67, recalled the officer saying.

Five years later, after aggressively expanding its U.S. farm loan portfolio, the bank called in Kruger’s loans as corn and soy prices collapsed and the United States was starting a trade war with China. As the U.S. agricultural economy sours and farmers’ financial woes pile up, BMO Harris is leaving behind a trail of farmers such as Kruger who have lost nearly everything.

The bank, a subsidiary of Canada’s Bank of Montreal (BMO), has struggled to recoup some of its investments through a slew of bitter legal fights, according to a Reuters review of court documents and bank regulator data, as well as interviews with dozens of U.S. farmers, bankers, and former and current BMO Harris employees.

“BMO Harris did push for growth, and they’ve had some of those deals blow up spectacularly in their faces,” said John Blanchfield, founder of Agricultural Banking Advisory Services, a consulting firm.

The plight of BMO Harris and its customers reflects broader distress in the U.S. farm sector. Farmers are struggling to pay back their loans or obtain new ones. Shrinking cash flow is pushing some to retire early and a growing number of producers to declare bankruptcy, according to farm economists and legal experts.

BMO Harris may yet face more defaults, judging by its high level of delinquent loans. At the end of June, nearly 13.1 per cent of its farm loan portfolio was at least 90 days late or had stopped accruing interest because the lender doubts the money will be paid back — compared to 1.53 per cent for all U.S. farm loans at banks insured by the Federal Deposit Insurance Corporation (FDIC). BMO Harris had the highest rate among the 30 largest FDIC banks, according to a Reuters analysis of loan data the banks reported to the regulator.

Ray Whitacre, head of BMO Harris Bank’s U.S. diversified industries unit, said in a statement that the bank’s distressed loans do not represent “the overwhelming majority” of its borrowers’ experiences. The Bank of Montreal and its U.S. businesses have been in farm lending for more than a century, he said. The bank takes a long-term view of helping farmers through “all stages of the economic cycle,” Whitacre said.

BMO Harris spokesman Patrick O’Herlihy attributed the high delinquency rates to the bank’s lending in the upper Midwest, where dairy and grain operators have faced serious financial challenges. Sam Miller, BMO Harris’ managing director of agriculture banking, said the bank is keeping a closer eye on its customers with cash-flow shortages and lending to fewer mid-sized operators. “We have to be more vigilant in underwriting the risk,” Miller said in an interview.

The bank declined to comment on any individual loans or borrowers, or on the prospect that it could face additional defaults based on its delinquency rates.

Missing collateral

The bank’s exposure to the farm sector reached a peak of $1.59 billion in 2018. Most other major banks have been scaling back their farm-loan portfolios since about 2015, as prices fell due to a global grains glut, according to the Reuters analysis of FDIC data.

Among the BMO Harris deals that went belly-up was $43 million in farm operating loans to McM Inc, run by Ronald G. McMartin Jr. in North Dakota. The farm filed for Chapter 7 bankruptcy in 2017.

BMO Harris secured a $25 million loan with McM’s grain, cattle and other farm crops, along with other assets. McM agreed to use the sale of these crops to pay the bank back, according to a copy of the loan.

During the bankruptcy proceedings, BMO Harris’ attorneys told the court it was unable to locate all the crops backing its loans, alleging that McM had sold some of the crops to pay other creditors first. Court documents also show the bank had not audited some of the farm’s financial statements. An outside consultant later found McM’s accounts receivable and inventory was overstated by at least $11 million, according to court filings. Neither McMartin nor his attorney responded to requests for comment.

Some experts and bankruptcy attorneys representing former BMO Harris customers say the bank issued too many loans for too long that farmers simply could not pay back. The problems, they said, stem from the aggressive practices of some loan officers and a lack of oversight by bank auditors.

Michael and Byron Robinson borrowed $2.5 million in an agricultural loan and another $2.5 million on a line of credit in 2013 through their Indiana businesses, court records show. The bank sued the Robinsons in federal court as part of its foreclosure process in 2016 and later sold the farmland at auction. The property brought far less than the value the bank had estimated the properties were worth to justify the original loans, said their bankruptcy attorney, Maurice Doll.

Michael and Byron Robinson did not respond to requests for comment. Doll said BMO Harris had loaded his clients up with far more debt than they could reasonably pay.

‘Don’t worry. it’ll be fine’

The Indiana-based BMO Harris banker working with the Robinsons and Kruger, Thomas “T.J.” Mattick, found his customers through farm magazine advertisements, word of mouth, at church gatherings and from rural loan brokers who were paid a finder’s fee, according to interviews with 10 farmers and one loan broker.

“I thought I could trust him,” Kruger said. “We would talk about church and faith all the time.”

When the Robinsons were looking to expand their corn and soybean operations, Mattick convinced them to buy two new farms instead of one — with BMO Harris financing 100 per cent of the deal, said Michael Morrison, the Robinsons’ farm bookkeeper and a former agricultural banker.

Morrison told Reuters he was concerned by how the bank’s underwriters valued the family’s grain in storage, on the premise that its value would continue to rise — even as grain prices were starting to soften at the time.

“We used to say that T.J. never saw a loan he didn’t like,” Morrison said. “I kept telling them, ‘Don’t do this. Don’t take on the debt.’ But T.J. kept telling them, ‘Don’t worry, it’ll be fine’.”

Mattick, who no longer works for the bank, denied that he encouraged borrowers to take on more debt they could pay back. In written answers to questions from Reuters, Mattick said “extensive underwriting and analysis” were conducted on the loans for Kruger and the Robinsons, as with any other file.

Mattick denied telling Kruger that he would “make the numbers work” without standard documentation such as sold-grain receipts. And he said BMO Harris would not have given the Robinson’s 100 per cent financing on their farms unless they pledged additional collateral. BMO Harris declined to comment on Mattick’s statements regarding individual loans and bank policy, and Reuters could not independently verify them.

“I worked with clients to help them determine what they could afford and never would have counseled them to incur debt beyond what they could afford,” Mattick said.

— P.J. Huffstutter reports on agriculture and agribusiness for Reuters from Chicago; additional reporting by Jason Lange and Pete Schroeder in Washington.

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