By Andi Anderson
Iowa farmers will be required to continue contributing to the state's grain indemnity fund for at least another year, according to an announcement by the Iowa Department of Agriculture.
The fund, which serves as a safeguard for farmers when grain buyers and elevators declare bankruptcy, will remain in effect until at least August 31, 2025. Farmers are currently paying a quarter-penny per bushel into the fund, a fee that was reinstated when the fund dropped below its $3 million minimum.
The financial strain on the fund was exacerbated by the bankruptcies of Pipeline Foods LLC, Global Processing Inc., and B&B Farm Store in 2021 and 2022, which drained the fund to approximately $312,000.
To restore the fund, state law mandates that the fee must be collected until the fund reaches an $8 million threshold. As of the third quarter of 2024, the fund had accumulated $4.7 million, making it unlikely to reach the required $8 million by the fourth quarter. Consequently, the fee will remain in place for another year.
The grain indemnity fund, established in 1986 during the Farm Crisis, acts as a "low-cost insurance policy" for Iowa farmers.
It covers 90% of a farmer's loss from a defunct state-licensed grain dealer or warehouse, with a maximum claim of $300,000. Over its history, the fund has paid out approximately $19 million in claims to more than 1,600 grain producers.
With farm incomes expected to decline by 25.5% this year, following a 16% decrease in 2023, the continued protection offered by the grain indemnity fund is crucial for many farmers facing financial challenges.
The Iowa Legislature had considered a bill this year to set the fund’s minimum at $8 million and a maximum at $16 million, but the bill did not pass.
The Iowa Department of Agriculture's grain warehouse bureau is responsible for regulating and examining the financial solvency of grain dealers and warehouse operators to ensure the ongoing protection of Iowa farmers through this fund.
The last time the fee was implemented was in 1989, and the fund has since managed to recover losses through its operations and earned interest. However, the recent financial challenges necessitate the continuation of these payments to maintain the fund's stability.
Photo Credit: gettyimages-alexeyrumyantsev
Categories: Iowa, General