Wellgrain collapse: Live updates

Grain trader Wellgrain went into administration on 2 March, owing £15m to 300 creditors.

The Farmers Weekly business team is continuing to pursue the story for our readers. Follow our live updates below:

Key points we know so far:

  • Wellgrain has ceased trading and is unlikely to restart.
  • Many farmers are among the 286 creditors owed £15m, and the amount owed is likely to rise
  • Natwest and RBS Invoice Financing are the only secured creditors, giving them first call on any cash from the administration process
  • Most farmers will be unsecured creditors – there is a real risk that they will receive nothing or only a few pence for every pound they are owed
  • We are aware of a number of farmers who are owed £100,000

We are keen to hear from Wellgrain suppliers who may have been affected.

Please get in contact with our business team: suzie.horne@rbi.co.uk /020 8642 4923; jez.fredenburgh@rbi.co.uk /020 8652 4920; jack.yates@rbi.co.uk /020 8652 4933

21 March 2017

Growers who want to terminate their contracts with WellGrain need to check the terms of their supply contracts with the company to see if they are entitled to do so as a consequence of WellGrain’s insolvency.

Where they are on the standard AIC Grain/Pulses No. 1/16 contract, then Clause 27 (Insolvency) sets out the procedure for contract termination in the event of insolvency. However the NFU recommends that members seek independent legal advice before relying on the clause.

In a Q&A document produced for its members, the NFU states that merchant representative group AIC has confirmed to it that clause 27 can be understood to mean that:

Once you have terminated your supply contract with WellGrain by giving written notice to WellGrain of your intention to do so, you will be free to sell the grain (which was previously contracted to WellGrain) to another buyer.

If you served notice to terminate your contract with WellGrain within two business days of WellGrain going into administration:

  • Your contract will be “settled” at the market price on the first business day after the administrators were appointed.
  • This means that if, on the first business day after WellGrain went into administration, the market price for your grain was lower than the price you would have received for it under your supply contract with WellGrain, then you can invoice WellGrain for the difference.

If you haven’t already served notice to terminate your contract with WellGrain, but you want to do so now:

  • Your contract will be “settled” at the market price either on the first business day after WellGrain went into administration or on the first business day after you learned that WellGrain had gone into administration
  • If the market price for your grain is lower than the price you would have received for it under your supply contract with WellGrain, then you can invoice WellGrain for the difference.
  • It is up to you to decide which of these two days you choose to compare your contract price with. Either way, you will be an unsecured creditor of WellGrain for this money. If you are already owed money by WellGrain, this additional sum will be added to the total which the company owes you.
  • If the market price for your grain is higher than the price you would have received for it under your supply contract with WellGrain, then the administrator will not be able to claim the difference back from you.

Any money you are owed by WellGrain for grain which you have previously supplied to it, and for which you have not yet been paid, will be owed at the contract rate.

Affected NFU members are advised to contact NFU CallFirst on 0370 845 8458 for assistance. Tees Law (an NFU panel firm) is available to provide legal advice to NFU Legal Assistance Scheme subscribers. Contact Tees Law on 01245 293190.

20 March 2017

We’re hearing some really tough stories of farmers with grain in Wellgrain stores who are trying to get hold of their crop. 

One farmer we’ve just spoken to said he has 250t of wheat in Wellgrain stores at a site owned by a third party, amounting to about half his farm’s grain. Of this, 120t is committed to another buyer. 

His neighbour has 300t in the store, 200t of which is also committed to a buyer that is not Wellgrain. 

The farmer, who is in his 70s, said he couldn’t sleep due to the stress of the situation and was anxious about lambing which was round the corner and which would add further strain. 

“It’s heartbreaking,” he said. “You can’t do you’re job without thinking about it.”

The real “double whammy”, he said, was that he’d been saving up for years for a grain shed, and had finally built it. 

He said he never borrowed money and would rather go without than get into debt now. 

He said he was also concerned about his son who works on the farm with him, as he was quiet and wouldn’t talk about the situation.

We are currently trying to find out if there is any news for farmers with grain in Wellgrain stores. We will post an update here if there is any further news. In the meantime, the NFU is advising members to contact its CallFirst service to log the issue, while it works out what legal assistance it will be able to offer. 

15 March 2017

Plimsoll Publishing analyses business performance and says that Wellgrain Ltd was exposed to low profit margins over the last five years. In the year to June 30 2015, its short term borrowing rose above £11m, almost doubling from the £5.5m of the previous year’s accounts. 

The Plimsoll analysis is based on the principle of the Plimsoll line on a ship’s hull, which marks the maximum depth to which the vessel may be safely immersed when carrying cargo. 

Based on the past four year’s accounts, the Plimsoll financial health rating for Wellgrain had been declining, said David Pattison, senior analyst. 

“Users of the Plimsoll analysis would have been aware that the financial health of Wellgrain Ltd was deteriorating.

“Gearing and liquidity charts are also part of the analysis and both of these ratios were also deteriorating, indicating that the company had been increasing borrowings and that there was less cover for creditors,” said Mr Pattinson.

14 March 2017

Business editor Suzie has done some digging around on forward contracts:

Does the insolvency clause in the AIC Grain/Pulses contract 1/16 release growers from forward commitments to supply Wellgrain (i.e. contracts made before appointment of administrators)?

Paul Rooke, sector head of oilseed and grain at trade body the Agricultural Industries Confederation, told us:

“The insolvency clause in the AIC contract does contain the option for an innocent party to cancel or suspend or refuse to accept or make deliveries. Written notice has to be given to allow this to take effect, as soon as possible after you become aware of the insolvency. 

“In practice, it is difficult to place a specific time on that as different parties will become aware of insolvency at different points in time. Suggestions of insolvency do not necessarily equate to knowledge of any official determination/ announcement of insolvency.”

In other words, just because you’ve heard a rumour a company is in administration or financial difficulties, does not mean you can serve notice based on this. 

We we continue to push for a clear line on what growers are entitled to do and will update here when we find out. 

In particular, the issue of grain stored in Wellgrain facilities is more complex and we are still seeking further advice.  

09 March 2017

The NFU’s specialist advice team at CallFirst has logged 140 members calling about Wellgrain, but says there is probably an element of duplication in this number.

A large proportion of the calls have come from East Anglia.  However members have also been calling in from the East Midlands and a scattering from other regions across the country.

If you are an NFU member you can contact CallFirst on 0370 845 8458. It provides free, unlimited advice on any agricultural, legal or technical issue.

General help and support is available from charities:

  • Rabi 0808 281 9490
  • The Farming Community Network 03000 111 999
  • The Samaritans 116 123
  • You Are Not Alone 0300 323 0400

08/09 March 2017

We’ve been talking of a number of Wellgrain suppliers…

Due to the circumstances with the company, Farmers Weekly was unable to contact Wellgrain to verify claims made by farmers over late payments, which include:

  • Late payments from as recently as last summer prompted some to stop trading with the company
  • Contract terms were 28 days after delivery, but in some cases Wellgrain took between six weeks to three months to pay.
  • The company often had to be chased for payment.

09 March 2017

Listen to our business editor Suzie Horne and Cambridgeshire farmer Luke Palmer talking about Wellgrain on BBC Cambridgeshire this morning. Skip to 1hr 6min, 20 seconds.

The NFU has published an updated Q&A for members

NFU acting senior legal adviser Lucy Ralph said: “The news that WellGrain Limited has entered administration is extremely worrying, particularly for those NFU members who are owed money by the company. “We are working to provide guidance to those NFU members who are affected by the administration. They are encouraged to contact NFU Callfirst as soon as possible.” 

08 March 2017

See our original story: Wellgrain owes 300 creditors in excess of £15m to see how the story unfolded, the Wellgrain Fact File and Q&A.

Originally published 10 March 2017

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