Lawmakers told Grain Indemnity Fund may need updating

By Jean Caspers-Simmet

DES MOINES — The Iowa Grain Indemnity Fund has done a good job of protecting farmers, but it’s time to modernize the program, legislators said during an informational meeting last week on the fund and grain marketers and ethanol plants.

The fund was created in 1986 by the Iowa General Assembly to provide producer protection from catastrophic losses when an elevator fails, said Roger Ginder, an Iowa State University economist.

"During the 1980s, the fund was meant to reduce the negative financial impacts on rural communities resulting from the failure of a grain dealer or warehouse," Ginder said.


The law required an assessment of one-quarter of a cent per bushel marketed by licensed grain dealers until the fund reached $6 million. The assessments resume when the fund falls below $3 million. About $8 million is in the fund now.

The payment cap is $150,000 per producer with claims on an elevator. Claimants receive 90 percent of grain losses if deficiencies occur in warehouse-receipted grain stored, bounced checks for cash grain sold and cash grain sales not paid in less than 30 days. Credit sales contracts aren’t covered.

"The Iowa Grain Indemnity Fund has not been used frequently but has served the intended function when failures have occurred," Ginder said.

The dollar payment caps and the fund balance target and trigger haven’t changed in 20 years, Ginder said. Grain prices, especially earlier this year, were much higher.

There have also been significant changes in the number and types of licensed firms covered by the fund, Ginder said. Fewer small proprietary elevators exists and cooperative elevator size has increased.

"This reduces risk in some respects," Ginder said. "There is better accounting, more sophisticated management and better capitalization and borrowing capabilities."

More of the crop is now handled by dealers, and there is less direct on-farm feeding, Ginder said. Ethanol plants and large integrated livestock feeding operations are purchasing large amounts of grain on a daily basis.

"What your testimony tells me is that it’s a good program, but it’s outdated," Sen. Jack Kibbie, an Emmetsburg Democrat said. He suggested asking for recommendations from IDALS and the attorney general now so the Legislature can go to work at the start of the session.


Rep. Mark Kuhn, a Charles City Democrat, said he was concerned with a provision that all Indemnity Fund claims must be filed within 120 days of a bankruptcy. He hopes to see a committee appointed to work on fund changes.

"I think we need $16 to $20 million in the Indemnity Fund," said Sen. Gene Fraise, a Fort Madison Democrat.

Rep. Sandy Greiner a Keota Republican, said grain dealer license fees need to be increased so that ethanol plants are paying their fair share.

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