(UPDATED COVERAGE, MAY 22, 2:08 P.M.) The closing of Monterey, Calif.-based Salyer American Fresh Foods has left Salinas, Calif.-area growers with an estimated $12 million in vegetables ready for harvest, forcing them to sell at a loss - if they can find buyers in a market now inundated with product intended for Salyer American.

Glen Dupree, vice president and chief financial officer of Merrill Farms, Salinas, said his company has broccoli, cauliflower and several varieties of lettuce contracted to Salyer American.

Salyer American closing leaves growers in the lurch

"It's going to be struggle, no doubt about it," Dupree said.

Merrill Farms harvests about 30 acres a week for Salyer American, some of which will be disked under if prices don't rise. It costs the company about $4,000 an acre, he said.

Paul Moncrief, a Salinas-based attorney representing Salyer American growers, said they are legally required to try to find other buyers if they want to pursue a Perishable Agricultural Commodities Act claim.

However, he doesn't expect growers to harvest without a buyer.

"What we told our growers is, 'Don't harvest anymore for (Salyer American) if you haven't been paid,'" Moncrief said.

No PACA actions had been filed as of May 21.

Patricia Rynn, a Newport Beach, Calif.-based attorney representing growers and shippers with contracts for Salyer American and SK Foods (a sister company in bankruptcy), said reaching an agreement between Salyer American's court-appointed receiver Steve Franson, lenders and grower-shippers would maximize payments to claimants.

"We're hoping to get something that will be relatively simple and fair to all people with an interest in recovery anything from Salyer (American)," Rynn said.

Gerard Rose, a Monterey attorney representing Salyer American said the company would close May 22, after lenders declined to provide funds that would have allowed growers to continue planting.

Rose said the closure came sooner than expected, and that the remaining 50-60 employees received their last paychecks May 22, about a week after another 12 were laid off. The company also employs about 1,000 temporary workers.

Salyer American came under the control of Franson on May 7. The company is being sued by Bank of the West, AgStar Financial Services and FCS Financial services, who all claim Salyer American hasn't paid back a $35 million loan made in 2007.

According to court documents, that's on top of the $12 million in unharvested crops.

SK Foods LP, Lemoore, Calif., and a tomato processor it owns, RHM Industrial Specialty Foods, Williams, Calif., are in Chapter 11 bankruptcy proceedings with its own lenders who are trying to recover $130 million they lent SK Foods in 2007. The company wants to sell the tomato processors by July before peak production starts, according to court documents. Both companies, along with Salyer American, are owned by SK Foods Group, Monterey. Citing concerns over Salyer American's financial status, those lenders stopped providing the company money to pay growers for crops under cultivation, Franson said in a statement released May 19.

In that statement, Franson said he was told by the lenders "that they would not advance (the company) any additional funds" because they stand to lose "significant sums of money to defaults."

According to the statement, Franson will be collecting money over the next several months for accounts receivable, securing and selling Salyer American's assets that are subject to liens, evaluating and paying legitimate claims of growers who sold commodities to or through Salyer American, and paying other legitimate debts.

Franson said in the statement that he feels "sorry for the growers and employees who have been loyal to" Salyer American, but that he would not speculate on the cause of the company's financial troubles, or those of SK Foods LP.