UMB Bank Leveraged Express Grain Debt to Take Mississippi Farmers’ Fall Harvest as Collateral, Class Action Alleges

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A proposed class action looks to represent Mississippi Delta farmers who allege they were misled into believing Express Grain Terminals was prospering and financially stable when they filled the company’s silos with grain during the fall harvest. 

The 19-page lawsuit alleges that Express Grain Terminals, unbeknownst to farmers this fall, was insolvent throughout 2021 and propped up by defendant UMB Bank, N.A., who, according to the case, “placed tremendous pressure on Express Grain” to fill its silos despite the fact that it was insolvent and drowning in debt. The suit alleges Express Grain, at the behest of UMB, touted through 2021 a misleadingly rosy business outlook so as to ensure farmers would deliver large volumes of grain during the crucial fall harvest season, regardless of whether the company could pay them for it. 

“In fact, several checks to farmers written by Express Grain bounced. Instead of being paid for their deliveries, the farmers were, in effect, just handing their crops to the Bank without any compensation.” 

According to the complaint, Kansas City-headquartered UMB Bank propped Express Grain up enough to allow the financially distressed grain elevator to survive into the autumn harvest season, when farmers would be delivering enormous amounts of grain under the expectation that they would receive prompt payment. As the lawsuit tells it, UMB had a much better vantage point than the farmers with regard to fully understanding Express Grain’s floundering financial health. 

“When the inevitable default occurred, the farmers went unpaid, and the Bank effectively seized the grain,” the lawsuit alleges, claiming UMB, in order to acquire more collateral, took advantage of Express Grain’s misrepresentations and omissions to Mississippi Delta farmers with regard to its financial stability.  

Per the case, Express Grain’s purchases would involve farmers’ delivery of grain to the company, who would then receive the title to the grain upon receipt. Express Grain would then weigh, inspect and access the grain, and pay the farmers by check within a few days, the suit says. The lawsuit summarizes that the operation of a grain elevator is subject to seasonal ebbs and flows of grain, with corresponding cash needs. At harvest time—from late August and September for corn through the end of October for soybeans—a grain elevator’s cash needs are at their highest given it requires liquidity to pay farmers for their crops, the case states.

The suit goes on to note that Express Grain operated in a competitive product market. Despite being a significant player, Express Grain, the case says, faced real competition from other silos, meaning farmers had the choice to sell their grain elsewhere.  

“Express Grain therefore had to compete with other silos on price, flexibility of terms, efficiency, timing and security,” the lawsuit says, claiming Express Grain, to remain competitive, “painted a positive picture of its future” forecast through 2021.

According to the filing, however, Express Grain was “highly leveraged, with massive amounts of debt” owed to principal creditor UMB Bank. The case says that the total balance on two loans, a revolving loan and a term note, owed by Express Grain to UMB as of September 2021 was approximately $70 million. Per the lawsuit, Express Grain was required to make payments sufficient to decrease the balance of the revolving loan during 2021. 

Ultimately, UMB forced Express Grain to post collateral, and virtually all of the grain elevator’s assets were collateralized pursuant to a loan agreement with the bank, the complaint continues. The most valuable collateral securing the bank’s loans was the grain held by Express Grain, the suit says, claiming the amount that Express Grain could borrow under its revolving loan was determined in part by the amount of grain in its inventory. 

“The volume of grain held by Express Grain is, predictably, greatest at the conclusion of the harvest season,” the case stresses. “For most crops, the harvest in the Mississippi Delta occurs in the autumn.” 

As the lawsuit tells it, Express Grain was effectively insolvent by Spring 2021 after years of dwindling cash reserves and financial statements delivered late to UMB, who kept the grain silo afloat only by forbearance. According to the complaint, the bank knew that if it called Express Grain’s loan at that time, there was be little grain to claim as security for the company’s debt. Moreover, the bank was also aware that if it called the loan in late September, at the height of harvest season for corn and soybeans, the Express Grain elevator would likely be filled with grain, upon which UMB could claim a property lien, the case alleges.

All told, UMG had incentive not to foreclose on Express Grain in the spring and to keep the company alive until the fall harvest season for collateral purposes, the lawsuit contends. According to the complaint, UMB and Express Grain modified the latter’s loan agreement at least four times in 2021 because of its difficulty in making payments. 

Although the truth of Express Grain’s financial distress was known to the company and the bank, a “spring update” from Express Grain nevertheless stated that “some exciting things [were] going on,” and touted the grain elevator’s apparent “growth and expansion” and ability to “continue to meet your needs and improve our services.” As late as September 28, Express Grain, in an email, reassured customers of its solvency and ability to pay for grain deliveries, the lawsuit says. 

The lawsuit alleges that at the time Express Grain made the rosy representations, UMB knew that the claims were false, that Express Grain was “teetering on bankruptcy” and that the misrepresentations would induce farmers to bring their crops to the floundering company.  

“Yet the Bank allowed these misrepresentations to be made and not corrected by the Bank or Express Grain,” the suit scathes. From the complaint: 

“Express Grain with the acquiescence and encouragement of the Bank, hired agents to visit farmers during the summer and even offered bonuses and other inducements such as accepting grain with an excessive moisture content, in order to convince more farmers to deliver more grain to Express Grain.  

The Bank knew that Express Grain’s financial condition was dire, and that it would be unable to pay for the voluminous grain deliveries it would receive in harvest season.  

The Bank had superior knowledge about Express Grain’s financial condition than Plaintiffs and other farmers and [sic] had.” 

On September 24, UMB gave notice to Express Grain that it had “elected to accelerate the Indebtedness, and declared all amounts owing under the Loan Documents immediately due and payable in full,” the lawsuit says. Four days later, UMB commenced litigation against Express Grain Terminals in search of the appointment of a receiver over the company, according to the case. Per the suit, Express Grain filed a series of petitions for relief under Chapter 11 of the U.S. Bankruptcy Code on or about September 29, 2021.

The lawsuit looks to represent all persons and entities who deposited agricultural products with Express Grain, and who did not receive payment for those products, from January 1, 2020 to October 31, 2021. 

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