Iowa farmers must continue paying fee into state grain indemnity fund for another year

Iowa farmers will have to continue paying for at least another year into a state fund that protects them when elevators and other grain buyers file for bankruptcy.

The Iowa Department of Agriculture said Tuesday farmers will pay the quarter-penny per bushel assessment into the grain indemnity fund, which covers their losses when grain buyers run into financial difficulty. The fee began to be charged a year ago, as required in Iowa law, when the fund fell below a $3 million minimum, the state says.

Bankruptcies in 2021 and 2022 of Pipeline Foods LLC of Fridley, Minnesota, Global Processing Inc. of Kanawha and B&B Farm Store of Jesup had drained the indemnity fund to about $312,000. State law says the fee must remain in effect for at least one full year until the fund reaches $8 million.

With $4.7 million in the fund after three quarters of fee collections, the fund isn't expected to reach the $8 million threshold in the fourth quarter of 2024, requiring that the fee remain in effect for at least another full year through Aug. 31, 2025., the state agriculture department said.

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The state says the fund serves as a "low-cost insurance policy for Iowa farmers," covering 90% of a farmer's loss from a defunct state-licensed grain dealer or warehouse up to $300,000 per claimant.

The news comes as farmers are expected to see tougher finances this year. The U.S. Department of Agriculture says it expects farm income to fall 25.5% this year. That's on top of a 16% decline in 2023.

The Iowa Legislature created the fund in 1986 during the Farm Crisis. Over the fund's history, about $19 million in claims have been paid to more than 1,600 grain producers.

The last time the fee was initiated was in 1989, the agriculture department said. Since then, the fund has recovered losses from defunct grain dealers and warehouses, and with interest earned on the fund, had provided enough revenue to prevent the reinstatement of the assessed fees.

The Iowa Legislature this year considered but didn't pass a bill requiring an $8 million fund minimum and a $16 million maximum.

The Iowa Department of Agriculture's grain warehouse bureau regulates and examines the financial solvency of grain dealers and grain warehouse operators to protect Iowa farmers.

Donnelle Eller covers agriculture, the environment and energy for the Register. Reach her at deller@registermedia.com or 515-284-8457. 

This article originally appeared on Des Moines Register: Another year's fees for grain indemnity fund ahead for Iowa farmers