PIERRE, S.D. (KELO) — An owner of the Roslyn grain elevator in northeastern South Dakota says he’s transitioning to a different bank as part of trying to keep it open.

Steve Schmidt told the South Dakota Public Utilities Commission that he’s switching from US Bank to Dacotah Bank.

Commission members praised Schmidt and his wife, Marcia, for their way of doing business but also voted during the meeting Thursday to suspend the elevator’s grain-buyer license, with the caveat that purchases be allowed under the commission staff’s direction.

The commissioners also authorized their staff to apply to the circuit court for receivership if needed.

Schmidt, 68, said he and his wife have stopped taking payment from the elevator and are relying on Social Security. He said the elevator had “too much-delayed pricing on hand” and he “just got myself out of compliance” with the commission.

“We’re getting everybody paid,” Schmidt said. “If Dacotah Bank will take us, we’ll be alright.” 

Said commission staff attorney Amanda Reiss, “This is not a case of a bad actor or bad behavior.” She described Schmidt as “a good hard-working man” who wants the elevator to continue operating. She said the commission staff is “optimistic that Roslyn can come through this.” 

The commission oversees grain trading in South Dakota. The commission’s grain-warehouse manager, Cody Chambliss, said the elevator doesn’t do forward-hedging and the grain is left unpriced until it’s marketed. In the meantime, the elevator collects fees for storing it.

“He does not lock in a price until the producer decides to sell,” Chambliss said about Schmidt. The result is the assets don’t show on the elevator’s balance sheet until after a sale, Chambliss said.

Said Chris Nelson, the commission’s chairman, “Every one of these grain-buyer difficulties is unique, really unique.” He asked how the elevator wound up with bad grain that needs to be blended. Chambliss said above-average snowfall and wide temperature swings created mold and hot spots. “I think it was a good crop year in that area. I don’t think it’s an astronomical amount of grain on the ground,” Chambliss said.

The hearing came on the same day that Governor Kristi Noem announced she had signed three pieces of legislation into state law that the commission sought for increasing penalties for grain-trading violations.

“You can hear his heart,” commissioner Kristie Fiegen said about Schmidt. She said the Schmidts were taking “an incredible amount of risk” in accepting price-later sales. Chambliss said the elevator doesn’t ship out grain until the producer decides to sell. Chambliss said the contracts typically are one year. “There is an expiration date on all these contracts,” Chambliss said. 

“It looks to me like they’ve been renewed and renewed and renewed and renewed,” Fiegen said. She said producers might be taking advantage of the elevator. Chambliss said producers sometimes like to gamble that prices will rise. He said soybean producers have seen $4 or more increases in the past 18 months to two years. Fiegen said “my eyes have opened.” 

“This was a really really hard case for me,” Chambliss acknowledged. He said the commission office received a lot of calls from the community in support. “We are asking a unique situation here. I believe this is different from other cases we’ve brought before you,” he told the commission. 

Commissioner Gary Hanson said he appreciated the staff’s compassion. “Schmidts are really providing a wonderful service to their community,” Hanson said. “It is a big risk that they’re taking and they’re taking it on behalf of the producers and certainly making a living at it.”

Hanson added, “I hate to use the term perfect storm, but it seems like that’s what hit them.” He said it was appropriate that the producers were willing to help the elevator stay in business. “It’s a very odd situation.” 

“We’ll work hard and we’ll make this work,” Schmidt said.

Chairman Nelson made the motion to take action against the elevator. He thanked the commission staff for “being diligent about this. This is not easy for you all and I know that.”

“Sometimes you just need a wake-up call. That what it seems like to me,” Nelson said, noting that seemed to be the perspective that the bank had reached and the commission’s staff too. The action protects farmers as the elevator works through the transition, he said. 

“I wish the best to the Schmidts under the circumstances. It looks like they’re excellent people,” Hanson said.