Those who buy grain directly from farmers will start collecting a fee to replenish a state fund. (Photo by Jared Strong/Iowa Capital Dispatch)
A long-dormant fee on grain sales is set to take effect in July to replenish a state fund that helps shield farmers from losses tied to dealer and warehouse failures.
The Grain Indemnity Fund Board voted unanimously on Thursday to reinstate participation fees for grain dealers and warehouses along with a quarter-cent-per-bushel fee for initial sales that is typically paid by farmers.
The board is required by law to reinstate the fees if the indemnity fund balance goes below $3 million. Those fees cease after the balance exceeds $8 million.
The fees are expected to generate about $6 million annually, predominantly from the per-bushel fees, according to the Iowa Department of Agriculture and Land Stewardship.
Iowa’s indemnity fund pays farmers 90% of their losses in amounts up to $300,000.
There is pending legislation that could alter how the fund works. It was established in the wake of the 1980s farm crisis and has paid out about $16 million to farmers to cover most of their losses when grain dealers fail to pay for crops they purchased, or if farmers are unable to withdraw their grain from warehouses.
The fees were last collected in 1989.
One bill that has passed the Iowa House would delay the start of collection until September to allow grain purchasers a bit more time to prepare for the fee collection.
James Kennedy, chief of IDALS’ grain warehouse bureau, said those purchasers were notified last fall to prepare for the change.
“I think there’s still going to be some out there that may struggle to get everything in place by July 1,” he said. “So the extra time may be beneficial to them. But I think for the most part, I’m hopefully, cautiously optimistic that everybody’s gonna be ready to go. Time will tell.”
Those buyers must figure out how to adjust their electronic or paper transactions to collect the fee and are required to remit those collections to the state every three months, he said.
Another bill that would eliminate the fees and instead replenish the indemnity fund with other existing fees on corn sales has stalled in the Iowa Senate. That bill is opposed by numerous agriculture groups because it would take money now used to promote and expand the corn industry.
Midwestern states have taken different approaches to protecting farmers from dealer and warehouse failures, either by establishing an indemnity fund or by requiring the companies to have insurance in the form of bonds.
For years, the Iowa fund’s balance has been slowly declining and was likely to trigger the fee reinstatement, but three grain dealer failures in the past two years accelerated the decline to the point that the fund will nearly go broke.
Claims that were made related to the bankruptcy of a soybean dealer exceeded the fund’s remaining balance, but a sufficient number of those claims didn’t meet the law’s requirements and were denied earlier this month.
After the valid claims are paid, the fund is expected to have less than $400,000.
Four claimants have appealed the board’s decisions, Kennedy said.
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