Iowa to Reinstate Grain Indemnity Fees

LINCOLN, Neb. (DTN) -- For the first time in 34 years, Iowa farmers will begin paying a portion of their grain sales to the state's indemnity fund beginning on July 1. The board that oversees the fund voted on Thursday to reinstate the fees following recent drawdowns from a number of grain warehouse failures.

The grain indemnity fund balance has dipped below $3 million following three recent failures, according to a news release from the Iowa Department of Agriculture and Land Stewardship.

The state of Iowa will assess a one-quarter-cent-per-bushel charge. That fee is expected to remain in place for at least one full year until the fund balance reaches $8 million. In addition, the state is required by law to reinstate participation fees for grain dealers and warehouses.

The fees apply only to cash sales and not grain sold on credit-sale contracts.

Iowa has paid out a number of claims in the past two years following the failures of Pipeline Foods LLC of Fridley, Minnesota; Global Processing Inc. of Kanawha, Iowa; and the B&B Farm Store failure in Jesup, Iowa.

"The balance of the grain indemnity fund after all approved claims have been paid is expected to be approximately $377,000," the state said in a news release.

Pipeline Foods announced it was filing for Chapter 11 bankruptcy protection in 2021, leaving farmers with millions of dollars in unpaid grain.

Global Processing filed bankruptcy in October 2022 after its grain dealers licenses were revoked in Iowa and Nebraska. The company did not have enough money to cover its grain purchases.

And in August 2022, farmers lost about $1.3 million when Jesup, Iowa-based B&B Farm Store was forced into foreclosure, https://www.dtnpf.com/….

Created by the Iowa Legislature in 1986 during the farm crisis to provide financial protection to farmers, the grain indemnity fund covers farmers with grain on deposit in Iowa-licensed warehouses and grain sold to state-licensed grain dealers.

In the case of a failure of a state-licensed grain warehouse or grain dealer, the fund pays farmers 90% of a loss on grain up to a maximum of $300,000 per claimant.

Since the creation of the fund, more than $16 million in claims have been paid to more than 1,500 grain producers.

The fund has generated about $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.

The Iowa Department of Agriculture and Land Stewardship's Grain Warehouse Bureau regulates and examines the financial solvency of grain dealers and grain warehouse operators to protect Iowa farmers. The Grain Warehouse Bureau is responsible for administering the Iowa Grain Depositors and Sellers Indemnity Fund. The department has commenced assessment implementation steps with industry stakeholders and has begun education efforts with farmers and grain producers. Members of the Iowa Grain Depositors and Sellers Indemnity Fund are appointed by the Governor and are subject to confirmation by the Iowa Senate.

Todd Neeley can be reached at todd.neeley@dtn.com

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