Great Falls Pulse Crop Processor Seeks Bankruptcy Protection Amid Tariff Hike

Jul 31, 2019

A Great Falls company that processes lentils, chickpeas and dry peas recently filed for bankruptcy, partly due to high tariffs instituted by the Trump Administration.

Pulse crop prices are half of what they were a few years ago and tradewars have cut off many of the main markets, leaving farmers and processors with few options.

JM Grain buys lentils, chickpeas and dry peas from farmers in Montana and North Dakota. Their sales plummeted from $27 million to $10 million from 2017 to 2018. The company has had to lay-off some of its workers and is in the process of reorganizing its debt.

Kevin McNew is the chief economist for Farmers' Business Network. He says JM Grain’s situation is part of a larger trend.

“We’ve seen pulse prices really just plummet in half. So you know the farmers here in Montana, a couple years ago, pulse prices were really strong, and of course they responded to that. They grew more pulses,” says McNew.

Montana is the top pulse producer in the U.S. and a lot of it used to go to India, where there are millions of vegetarians eating plant-based protein. In 2017, India started imposing high tariffs on pulse imports to protect its own farmers.

The tariffs increased again last year in response to the U.S.’s tariffs on steel.

“But here in the last really year, we’ve seen those tariffs just get to astronomical levels and completely choke off any opportunities for U.S. farmers, including Montana,” McNew says.

Tariffs went up even more following the re-election of India’s Prime Minister Narendra Modi this May. Part of Modi’s election platform was a promise to improve farmer livelihoods.

JM Grain’s President Justin Flaton says the international politicking is having impacts here in Montana.

“It’s changed the paradigm of the pulse market because India was originally buying 35 and 50 percent of the exportable pulses,” says Flaton.

Right before the price crash, Flaton says JM Grain made contracts with chickpea buyers, not knowing Montana’s yields would be lower in 2017 due to a severe drought.

“We ended up short in the market and buying high, expensive priced chickpeas to sell to our contracts. And then when we turned around to sell those, we didn’t get paid. We got kind of the worst case scenario,” he says.

Flaton says many of the foreign buyers defaulted on purchasing JM Grain’s pulses or bought at a discounted price.

The United States Department of Agriculture announced Thursday farmers who were harmed by the recent trade wars will receive between $15 to $150 per acre starting in mid- August.

It’s part of the Trump administration’s $16 billion aid package.

But that doesn’t really help JM Grain or other processors.

“The tariff relief package is definitely weighted heavily towards producers so for us, we’re still feeling that sting,” says Flaton.

He says the company has other importers like Mexico, Colombia and countries in North Africa, and he’s hopeful they can rebuild the business.

Economist Kevin McNew says pulses are one of the few cash crops that can grow in Montana and farmers would benefit if the market can grow.

“When you start to take away these specialty crops that are not really big markets to begin with, and then you have these tariffs in place, it just really takes the wind out of the sails for a potentially good play for farmers,” says McNew.

McNew says pulses work well in Montana’s dry, arid climate. They improve soil quality and provide another source of income for farmers. He says Trump’s aid package will help, but farmers will still be hurting.

“I think the bad news is farmers are somewhat pawns in this game of economic warfare,” he says.

“At the end of the day, what U.S. farmers want is free trade. You know, they don’t want tariffs and trade wars and relying on government checks,” he adds.

During a press call with rural reporters Tuesday Democratic Senator Jon Tester, who’s also a farmer, was asked about President Trump’s aid package.

"This $16 billion is appreciated on one hand, but on the other hand, it doesn’t solve the problem. And the problem is we need to have those markets,” says Tester.

He says it’s a lot harder creating markets and trade deals than shutting them down.

“And the unfortunate part is, if there was a trade deal tomorrow, some of these markets are simply not going to get back,” he adds.