Grain Indemnity Fund assessment to continue

August 29, 2024 | Jeff Hutton

The assessment on grain sold to or deposited at Iowa-licensed grain dealers and warehouses as part of the Iowa Grain Depositors and Sellers Indemnity Fund (Grain Indemnity Fund) will continue for an additional year.

That’s according to the Iowa Department of Agriculture and Land Stewardship (IDALS), which noted that barring any further claims made against the fund, the assessment is anticipated to cease on Aug. 31, 2025.

In April of 2023, the board that oversees the fund agreed to reinstate producer fees after the fund balance dropped below the statutory $3 million floor after multiple claims were filed following grain facility failures in 2021 and 2022.

By law if the fund drops below the $3 million threshold, it requires the Grain Indemnity Fund Board to reinstate the participation fees for grain dealers and warehouses as well as a ¼-cent per bushel assessment. Under existing law, the assessment must remain in effect for at least one full year and must also remain active until the board votes to suspend the collection of fees or the Fund reaches a balance of $8 million.

The restoration of fees on grain sold to or deposited at Iowa-licensed grain dealers and warehouses began Sept. 1, 2023.

Prior to the start of the assessment in September of 2023, the balance of the fund was just under $312,000. IDALS reports that assessment collection during the first three quarters, which occurred in December 2023, March of 2024 and June of 2024, has now produced a balance of just more than $4.7 million. The final quarter of assessment for this current year will be collected next month. Based upon fourth quarter collection estimates, the fund balance is not expected to exceed $8 million and that means the assessment must continue another year.

Created by the Iowa Legislature in 1986 during the farm crisis, the fund is designed to provide financial protection to famers with grain on deposit in Iowa-licensed warehouses and grain sold on a cash basis to state-licensed grain dealers. In the case of a failure of a state-licensed grain warehouse or grain dealer, the fund will pay farmers 90% of a loss on grain up to a maximum of $300,000 per claimant. Over the nearly 40-year history of the fund, more than $19 million in claims have been paid to more than 1,600 grain producers.

“The Grain Indemnity Fund serves as a low-cost insurance policy for Iowa farmers. This program has proven incredibly successful at protecting Iowa farmers from catastrophic financial losses over the last three decades,” says Iowa Secretary of Agriculture Mike Naig. “Existing Iowa law now requires the fund to be replenished for the first time since 1989. We will continue to work diligently to ensure the financial soundness of the grain industry so that we can prevent failures and protect farmers’ investments.” 

Work continues

Earlier this year, one of the Iowa Soybean Association’s (ISA) legislative priorities was to modernize the fund and raise its cap from $8 million to $16 million.

Although nothing changed during the 2024 Iowa Legislative session, Matt Herman, ISA’s chief officer for demand and advocacy, says it remains a priority.

Along with raising the fund’s cap, Herman says the real point of discussion for modernizing the fund would be whether the fund would cover credit sale contracts. While many farmers may not think credit sale contracts impact them, Herman says that’s not necessarily the case.

“In fact, we do have a lot of farmers who engage in those agreements,” he says, pointing out that some soybean and corn producers who sell grain to a co-op in the fall but take payment in the spring, is technically a credit sale contract.

“If new legislation includes credit sale contracts, the liability could balloon to hundreds of millions of dollars at any given time and that’s something we need to be aware of,” says Herman.

Whether or not state legislators take up the issue again in 2025 remains unclear.

More information

More information about the fund can be found on the Iowa Department of Agriculture & Land Stewardship website. Questions about potential claims? Call IDALS at (515) 281-5324.

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