Lawsuit Over Ethanol Marketing

OMAHA (DTN) -- An Iowa ethanol plant is suing Bunge North America Inc. in federal court for $7 million, alleging Bunge lost interest in marketing ethanol after terminating a key employee.

Southwest Iowa Renewable Energy LLC (SIRE) operates an ethanol plant just south of Council Bluffs, Iowa, along the Missouri River. Bunge operates a soy crush facility nearby.

In a lawsuit filed in the U.S. District Court for the Southern District of Iowa, SIRE is suing for breach of contract after moving to terminate its marketing agreement with Bunge. SIRE also details how a marketing agreement starting in 2020 between SIRE and Bunge first worked well but then fell apart in late 2022 after Bunge stopped focusing attention on ethanol markets. SIRE seeks to recover at least $7 million in lost income from Bunge.

In a statement to DTN on Wednesday, a spokesperson for Bunge commented, "While Bunge will not get into the specifics of the litigation, the allegations have no merit. Bunge looks forward to vigorously defending itself against these claims."

SIRE detailed the ethanol plant created a marketing agreement with Bunge to sell all of SIRE's ethanol and manage the clearing of carbon credits under California's Low Carbon Fuel Standard for SIRE as well. In return, SIRE provided Bunge with a marketing fee.

Bunge complied with its agreement for SIRE until November 2022. SIRE noted the partnership was valuable because of Bunge's investment and focus on ethanol, along with Bunge having the personnel to market SIRE's ethanol. SIRE noted in its complaint that Bunge was able to ensure SIRE got an average price consistent with other ethanol plants in Iowa and Nebraska.

Much of Bunge's work selling SIRE's ethanol relied on one employee who connected with ethanol buyers for SIRE. That employee, Jeremy Ragan, spent a lot of time at ethanol conferences and provided detailed recommendations to SIRE on selling its existing ethanol stocks to maximize profits. Ragan also provided detailed forecasts on markets and how to prepare for future markets such as Sustainable Aviation Fuel (SAF).

Bunge terminated Ragan in late November 2022. SIRE noted, "The effect of Bunge's termination of Jeremy and its lack of notice or planning was felt by SIRE immediately."

After Ragan left, SIRE said Bunge provided limited information on commodities and ethanol markets to SIRE during risk management meetings. The information "consisted only of generic slides that Bunge obtained through commercial sources." SIRE also indicated that after Ragan left "an unsettling trend" began where SIRE would receive a new marketer every few months.

"The result of these constant transitions was that marketers failed to ever become fully acquainted with ethanol buyers, failed to have an understanding of SIRE's ethanol business and failed to become aligned or support SIRE's strategic objectives, resulting in reduced revenue."

SIRE also pointed to a sale Bunge made of its ethanol business in Brazil, making it clear that ethanol was not a core business for Bunge.

SIRE indicated Bunge's lack of interest in ethanol has caused SIRE to lose profits on its products, involving at least $7 million between October 2022 and the end of 2023.

"Since Jeremy's departure, Bunge has failed entirely to exercise commercially reasonable efforts to market SIRE's ethanol," SIRE stated.

SIRE also discovered Bunge was not submitting necessary reports to California for low carbon fuel credits. The reports are required to remain in compliance with the California Air Resources Board (CARB). Bunge initially informed SIRE that Bunge officials did not believe they were required to submit those reports, but later reversed its position and eventually filed a late report for 2022. SIRE states Bunge should have understood its reporting obligations as an ethanol marketer.

"Reporting obligations for the LCFS are basic training materials for ethanol marketers," SIRE stated.

The lawsuit states SIRE would officially terminate its marketing agreement with Bunge on July 31.

Chris Clayton can be reached at Chris.Clayton@dtn.com

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