Farmers aren't immune to bad economy and should be prepared
ST. PAUL -- This autumn, Minnesota farmers can be thankful for another harvest, another year and another chance to enjoy the holidays with friends and family. We also can be thankful that for the most part, Minnesota's ag economy does not seem to...
ST. PAUL -- This autumn, Minnesota farmers can be thankful for another harvest, another year and another chance to enjoy the holidays with friends and family. We also can be thankful that for the most part, Minnesota's ag economy does not seem to be experiencing the same level of crisis as other portions of the nation's economy.
However, no part of our highly integrated economy is completely immune from this economic downturn. This message has hit home again in recent weeks as we read headlines about bankruptcies and other financial difficulties hitting a few high-profile businesses in the ag sector. While these problems seem to be isolated, it is natural for farmers and others who depend on them to wonder what if anything can be done to prevent a "domino effect" of one bankruptcy in one part of the ag sector triggering others among businesses that depended on that company.
Let's talk first about what can be done at the state level. A core part of the mission for the Minnesota Department of Agriculture is to ensure a strong and healthy agricultural economy.
Programs and services
We've talked before about the many ways we promote Minnesota agricultural products at home and abroad, and our regulatory and certification programs certainly help ensure quality and fairness. However, there are other programs and services we provide to ensure orderly commerce. For example:
n MDA regulates grain buyers and warehouses, ensuring they are properly licensed and bonded. All Minnesota grain buyers and warehouses need to be licensed, and they need to post a bond. The bond provides indemnification to grain sellers against the breach of a cash sale contract by a buyer, the breach of a grain storage contract by a public grain warehouse operator, or the breach of a grain bank storage contract by a grain warehouse operator. To ensure maximum protection, farmers involved in cash sales who don't get paid by their grain buyer need to immediately notify MDA by calling (651) 201-6314.
n With limited exceptions, grain buyers must provide a financial statement annually, along with a report of the financial statement that is prepared by an independent public accountant and a certification by the chief executive officer that the information accurately reflects the financial conditions of the company.
n Entities storing grain must file with the ag department a tariff or schedule of all charges relating the storage of grain, including the charges for receiving, storing, redelivery and handling.
n Entities storing grain must provide evidence of insurance of grain stored for others against any loss resulting from fire, windstorm and extended coverage risks.
What can farmers do?
First, be aware that if an entity files for bankruptcy, it is important for farmers to know their rights and obligations under contracts they have signed. For this reason, we recommend farmers talk with a lawyer when dealing with a bankrupt business.
It also can be beneficial in some cases for farmers to work together and perhaps pool their resources to share the cost of legal representation.
I think our agricultural economy will remain strong despite the troubles on Wall Street. But in these times of uncertainty, it is prudent for us to be prepared and have an action plan in case we do encounter problems.
Editor's Note: Hugoson is Minnesota's agriculture commissioner.