Reinstatement of grain indemnity fund pushed back

June 8, 2023 | Jeff Hutton

The restoration of fees on grain sold to or deposited at Iowa-licensed grain dealers and warehouses has been pushed to later this year.

In late April, the board that oversees the state’s Grain Indemnity Fund agreed to reinstate producer fees after the fund balance dropped below the statutory $3 million floor as outlined in Iowa code. Originally, the fees were scheduled to go into effect July 1. That’s now set for Sept. 1

During this past legislative session, the Iowa House and Senate approved a measure to delay the reinstatement by two months. Late last week Iowa Gov. Kim Reynolds signed the legislation into law that the collection of producer fees would begin in September.

Financial woes

The fund, established in 1986, was designed to offer some protection coverage for farmers who have stored grain in a warehouse licensed by the Iowa Department of Agriculture and Land Stewardship (IDALS) and those farmers who sell grain to a licensed dealer.

Those who have grain stored in an IDALS-licensed warehouse and those who sell grain to a licensed dealer are covered by the fund. In a loss situation, the fund pays the claimant for 90% of the claimant’s loss up to a maximum of $300,000.

Over the history of the Grain Indemnity Fund, more than $19 million in claims have been approved to more than 1,500 grain producers, according to IDALS. The fund has generated approximately $9 million in assessed fees, which were last collected in 1989. Interest income, combined with the fund’s ability to recover losses from defunct grain dealers and warehouses, has provided additional revenue.

However, recent claims made to the fund following the failures of three dealers/warehouses over the past two years, have meant the fund has dropped below $3 million. The balance of the fund after all approved claims have been paid is expected to be approximately $377,000, according to IDALS.

Current law requires that if the fund falls below $3 million, the Grain Indemnity Fund Board must reinstate participation fees for grain dealers and warehouses as well as a ¼-cent per bushel assessment that can be passed on to producers. The assessment will remain in effect for at least one full year. These fees – which only apply to cash sales and not grain sold on credit sale contracts – remain active until the fund reaches a ceiling of $8 million.

Iowa Soybean Association (ISA) Senior Director of Public Affairs Michael Dolch said the fund was established to ensure farmers were partially protected against a grain warehouse or dealer default. “It’s a low-cost insurance policy of sorts,” he says.

But there has not been considerable education around the fund’s existence since it was created, much less about its coverage and potential participation fees, Dolch says.

Given the recent failures of those grain warehouses and knowing the Grain Indemnity Fund Board would reinstate the ¼-cent per bushel fees, legislators approved the reinstatement from July to September.

ISA delegates, Dolch shared, adopted a formal resolution supporting the fund’s existence and stated purpose.

Unwarranted proposal

While it was not surprising legislators discussed beefing up the fund this past session, the surprise came when an Iowa senator proposed using checkoff dollars as a potential solution in shoring up that fund.

However, ISA and other farm organizations were quick to suggest efforts to use checkoff dollars to supplement the fund were out of line and in the case of soybeans, illegal.

“The proposal redirecting farmers’ checkoff funds was something we didn’t expect this session,” Dolch says.

“While we recognize and agree that the Iowa Grain Indemnity Fund should be examined and potentially modernized given the value of today’s crop and recent grain dealer defaults, for some reason Iowa senators worked to scoop corn and soybean checkoff resources without commodity group consultation.”

The legislation failed, but Dolch says the proposal was an important reminder to legislators and other stakeholders that the fund is not connected to corn and soybean checkoff dollars.

More information

IDALS notes the Grain Warehouse Bureau is responsible for administering the fund and has begun assessment implementation steps with industry stakeholders as well as initiating education efforts with farmers and grain producers.

More information about the fund or questions about potential claims can be found by calling IDALS at (515) 281-5324 or by going to the IDALS website.

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