COLUMBUS — Grain farmers have new protection in the event a grain elevator fails, thanks to a new law signed July 11.
The new law signed by Gov. John Kasich will put farmers first in line for assets in the event of a grain elevator failure and boosts the size of the farmer-funded grain indemnity program.
Ohio Senate Bill 66 was sponsored by Ohio Senator Cliff Hite, R-Findlay, who also serves as chairman of the Ohio Senate Agriculture Committee.
“Before grain indemnity, smaller operators could be driven entirely out of business in the event of a grain elevator bankruptcy. We’ve been covered since 1983, but some have questioned – and the state has had to go to court – over the question of who is first in line as a creditor when an elevator fails,” said Roger Wise, president of Ohio Farmers Union.
First in line
The law now makes it clear that farmers are first in line to be paid when a grain elevator fails.
In addition, the updated law increases the size of the farmer-funded grain indemnity fund, which pays producers for losses in the event of an elevator failure. Commodity groups and farm organizations sought to have the fund size increased due to several years of historically high prices for corn and soybeans.
Brett Gates, Ohio Department of Agriculture spokesman, said that testimony given during the hearings for the bill estimated that the estimated $2 million paid out for the Bobb Brothers Inc. grain elevator failure would have been $6 million, if it had failed in 2012 due to the increase in grain prices.
The fund’s maximum balance will be increased from $10 million to $15 million. The minimum balance has been increased from $8 million to $10 million.
The fund’s balance is built through occasional one-half cent per bushel levies on corn and soybeans paid by farmers when they deliver grain to an elevator. The levy is triggered when the fund dips below its minimum balance and stops when the maximum balance is reached.
While it is not common for grain elevators to fail, it has happened. In the past five years there have been two elevator failures in Ohio according to the ODA. The Archbold Elevator failed in 2011. It was the largest ever payout for the grain indemnity fund when $2.5 million in net payments were made to farmers from the fund.
Before the indemnity law and fund, a single elevator failure could wipe out smaller farmers. The fund is a form of insurance for farmers. Tax money does not enter the fund.
The ODA administers the fund and the associated regulatory and inspection activities related to Ohio’s grain handlers. An annual assessment against the fund pays for these ODA activities.
The new law will not take effect for 90 days. Since the fund is now around $8 million, the half-cent per bushel levy will need to begin to be collected. ODA must give at least 90 days’ notice before collections, so farmers won’t be paying the levy until 2014. Once the fund’s new $15 million cap is reached, collections will cease.
According to the ODA, it will probably take around two years to build the fund to $15 million. Based on historical experience, it would then probably be several years before the levy will need to be collected again.