State grain fees will resume this week to replenish indemnity fund

A fee of a quarter-cent per bushel on initial grain sales is poised to go into effect Friday to rebuild a state fund that protects farmers from dealer and warehouse failures.

That fee — along with participation fees for dealers and warehouses — is projected to generate about $6 million annually for the state’s Grain Indemnity Fund.

The fund has been in operation for about four decades and pays farmers for their losses if they are unable to collect payments from dealers or their grain from warehouses. It pays up to $300,000 per claim.

The fee hasn’t been collected since 1989 because the fund has long had a balance in excess of a state-mandated $3 million minimum. The fee ceases after the fund surpasses $8 million.

Under previous law, its reinstatement was supposed to happen in July, but state lawmakers delayed the start for two months to allow dealers to adjust their accounting procedures to collect the fee. Proceeds are paid to the state quarterly.

State agriculture officials have sought in recent months to prepare licensed dealers — including farmer cooperatives — for the change.

“Even with all the notifications, publications and informational meetings, there’s still a lot of questions out there,” said James Kennedy, the grain warehouse bureau chief for the Iowa Department of Agriculture and Land Stewardship. “We still maybe have an uphill battle to make sure everybody’s educated.”

Larger dealers often use computer software to track their sales, but some still document them with paper.

Mark Walter, grain manager for NEW Cooperative, which is among the largest farmer cooperatives in the state, said his company paid an unspecified amount of money to have its software modified to accommodate the reinstated fee.

“We are ready to go,” he said. “Our software got updated, and it’s just a matter of turning it on.”

Kennedy said IDALS will ensure that the dealers are complying with the new requirement during its periodic examinations of the companies.

The indemnity fund’s balance is about $380,000. The balance had been declining for years, but that trend accelerated in the past two years when three grain dealers went bankrupt and couldn’t pay all their debts to farmers.

The most recent was Global Processing Inc. in Kanawha, which specialized in organic and non-genetically modified soybeans. Soybean producers who dealt with Global filed claims that totaled about $3.4 million with the indemnity fund’s board, but the board rejected about $1.5 million worth of claims, mostly because they were for sales that were too old.

State law requires those sales to occur within six months of a failure, and some of the claims were for sales that happened up to three years ago.

Those farmers whose claims were denied can still recoup their losses through the company’s bankruptcy proceedings. The state also attempts to recoup its indemnity fund payouts to farmers from the defunct companies.