The drought has wreaked havoc on crop expenses and production, it has also resulted in irrigation innovation and increased water use efficiencies. There are very few open irrigated fields left in the Central Valley or Southern California. Drip, fan jet, and micro sprinkler systems have replaced row watering methods. The price per acre to convert to one of these water systems is costly; however, despite the shortage of water, investment in these systems has generally saved water and contributed to increased crop production per acre.

Despite the drought and other factors that have increased farming costs significantly, there have been very few agriculture receiverships over the last few years. The dairies generally have not gone through reorganization or receivership; instead, they simply have ceased business and gone directly into bankruptcy liquidation. Many recent agricultural receiverships arose out of failed crops, fraud, family disputes or other outside circumstances leading to the need for reorganization or liquidation through a receivership.

Financing for agricultural receiverships typically has been obtained from two sources. The first source is the lender which sought appointment of the Receiver. Most often, we have presented a budget to complete the crop year(s) and the lender has approved the budgets and funded through Receiver’s
certificates, which have a super-priority status, making them attractive to lenders. The second source has been what would be considered a “secondary” financer, also through Receiver’s certificates. These financing sources have included fruit packers, nut processors, creameries, and outside investors, some of which might already hold second-position liens against the assets of the borrower, but obtain a priority position in the proceeds of the receivership up to the amount loaned under the certificates.

Agricultural receiverships are uniquely complicated due to the Perishable Agriculture Commodities Act, hazardous material handling, labor laws, dairy cattle supply liens, producer liens, multiple tier lending (land/long-term loans vs. short-term annual crop credit facilities), subordination of liens to obtain
operating funds, and need for crop production and/or animal husbandry knowledge.

The agricultural Receiver is responsible for all the normal Receiver duties, much like a rents and profits receivership, as well as the additional duties of involved in caring for a crop, multiple crops and/or live animals. Tasks often include water, fertilizer, weeding, thinning and cultivating, harvesting, marketing, and sales contracts. If animals are included, the tasks broaden to include, commodity purchasing and growing, water and feeding (twice daily), veterinary health care, dietician consulting, commodity sales, livestock birth, sales and replacements, health and safety issues, maintenance and sanitary issues, 24 hr./365 days, employees and remaining operations.

Agricultural receiverships are by far the most difficult type of receivership I have had. They require the use of agronomists; contract labor providers; pollination apiaries; outside tractor and other equipment services; specialized irrigation providers; and pest control agents to monitor and make recommendations on fertilizers, herbicides and insecticides. At the time of harvest, the receiver must hire harvesting companies and processors, and negotiate the sales. Although there are multiple resources available for the various operations and commodities for which an agricultural Receiver may be responsible, it is up to the Receiver to determine through his knowledge and experience what external resources are needed in any given situation.

*Jim Lowe, at Executive’s Edge LLC in Laton has Central Valley ag receivership experience from crops, animals, equipment, and structures to the marketing savvy to sell tons and tons of figs.