ST. PAUL — Minnesota is poised to put millions of dollars into a fund to protect farmers from a financial collapse at a grain elevator, but a group representing those elevators remains opposed to the changes.
The changes could include fewer financial reporting requirements that Minnesota started requiring just a few years ago after some high-profile financial disasters at co-op elevators.
“You're concerned about paying producers, which is fine, don't get me wrong. They're more concerned with paying producers in the event of a failure, but nobody seems to care about trying to prevent future failures from happening,” said Laura Lemke, executive director of the Minnesota Grain and Feed Association,
A grain indemnity fund is currently included in bills to fund the Minnesota Department of Agriculture. The House version of the bill, passed Thursday, April 20, includes $5 million to establish the fund. The Senate version includes $14 million.
Minnesota Ag Commissioner Thom Peterson said a conference committee should meet this week and should be able to reach agreement on the grain fund and other funding differences in about a week or so.
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The proposed rules would require that there be at least $9 million in the fund. If it drops below that, elevators will have to collect a fee of 0.2% on grain sales to feed into the fund.
While farmers generally aren’t fans of more fees, “it might not ever start if we have the higher number and we don't have any failures,” Petersen said.
Lemke says the changes include weakening financial reporting requirements added by the Legislature in 2019 that should stay in place.
Petersen said he would like to see some reporting requirements remain but said some of the requirements were too much for some small elevators.
Minnesota is the exception to the rule in the Midwest on grain indemnity funds, with most other states already having them in place.
Minnesota has only required that grain dealers post a bond to be licensed. Petersen said when an elevator fails and farmers are owed money, the average payout from the bonds is only 11 cents on the dollar. "Our binding structure is just not enough of support for our farmers," he said.
Whether grain bonding remains in the bill will be up to the conference committee.
Minnesota grain dealer disasters include the Porter elevator in 2015 and the Ashby elevator in 2018. In the Ashby case, elevator manager Jerry Hennessey was sent to federal prison after it was discovered he spent the co-op money to pay for lavish big-game hunting trips around the globe.
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Other failures include Pipeline Foods and Global Processing, which dealt in more specialized commodities.
Such failures helped lead to more stringent reporting requirements passed in 2019. Lemke says those requirements haven’t been given enough time to prove their effectiveness.
Lemke says her organization wants the requirements to stay and has advocated for other changes:
- Increasing the grain bond amounts for grain buyers and warehouses
- Deferred payment contract insurance for producers
- Education from the Minnesota Department of Agriculture on the risks involved in selling grain.
She said she fears that the indemnity fund will provide a false sense of security for farmers.
“Some people may be more willing to sell their grain to someone they don’t know,” Lemke said.
Part of the Minnesota Grain and Feed Association’s opposition to the fund is that it means more work for its elevator members at a time when many already are short-staffed because of the labor shortage.
Minnesota Farm Bureau Federation stands opposed to creating a fund with fees on grain transactions while the Minnesota Farmers Union is among the groups that has backed creating such a fund for several legislative sessions.
“We feel strongly about this issue, because our members and others who market grain are among the least protected in the nation,” Minnesota Farmers Union President Gary Wertish said in a news release.
Petersen noted that if fees are paid to support the fund, they are refundable, the same way many ag checkoff programs function.
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Previous attempts to create an indemnity fund have failed in part because of the divided control of the Minnesota Legislature between Democrats and Republicans. For the 2023 session, Democrats control both houses.
The grain indemnity fund is part of the overall budget for Ag Department. Other items in the budget where the conference committee will have to finalize spending amounts include money for:
- Supporting emerging farmers
- Combating highly pathogenic avian influenza and preventing African swine fever outbreaks
- Soil health initiatives
- Supporting meat processing
In a statement on Friday, April 21, Rep. Paul Anderson, R-Starbuck, the ranking House Republican on agriculture said he supports the grain indemnity fund but the House bill overall has too many fees — $13.6 million — and regulations.
“In general, the bill is more about what it does to farmers than what it does for them,” Anderson said.
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