(Photo: Iowa Soybean Association)
Reinstatement of grain indemnity fund begins Sept. 1
August 24, 2023 | Jeff Hutton
The restoration of fees on grain sold to or deposited at Iowa-licensed grain dealers and warehouses begins Sept. 1
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 but that was pushed back until September.
“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.”
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.
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.