Iowa Secretary of Agriculture Bill Northey says farmers who think they have a claim for payments from bankrupt ethanol producer VeraSun Energy should contact the Iowa Department of Agriculture's Grain Warehouse Bureau.
VeraSun, which operates four ethanol plants in Iowa, went into Chapter 11 bankruptcy October 31 after suffering massive losses in the corn futures markets. VeraSun has continued to operate the plants and buy corn.
"If you are a producer who delivered grain to an Iowa VeraSun plant and you believe you have a claim on a grain sale that has not been paid, please contact: Richard Wahl our Grain Warehouse Bureau Chief at 515-281-5987 or [email protected]," says Northey. The official notice regarding the Grain Indemnity Fund can be found at www.iowaagriculture.gov/press/VeraSun.pdf.
How the Iowa Grain Indemnity Fund works
The Iowa Department of Agriculture and Land Stewardship's Grain Warehouse Bureau is responsible for licensing and inspection of grain dealers, including ethanol plants, in order to protect farmers and other selling grain these facilities. The Bureau also is responsible for managing the Iowa Grain Indemnity Fund, which was created in 1986 to provide financial protection to farmers.
Below please find a copy of a press release Northey issued earlier this fall in an effort to educate farmers about the Department's Grain Warehouse Bureau and the Grain Indemnity fund.
The Grain Warehouse Bureau within the Iowa Department of Agriculture and Land Stewardship is responsible for a licensing and inspection program designed to protect farmers and others selling grain to a grain dealer. The Bureau provides oversight of those with a grain dealer's license and reviews their financial position, either annually or more frequently in cases where closer scrutiny is justified.
Indemnity fund covers losses up to $150,000
In addition, they examine licensee's grain records and, in the case of a state licensed warehouse operator, their grain inventory. Records are examined to make sure there are accurate records a licensee's grain obligations, that they are handling grain contracts properly and making payment for grain as required. Grain inventories are checked for quantity and quality to ensure that it's sufficient to cover the grain obligations on the licensee's records, as required by law.
The Bureau also is responsible for the Iowa Grain Indemnity Fund, which was created in 1986 to provide financial protection to farmers.
The indemnity fund covers farmers with grain on deposit in an Iowa licensed warehouse and grain sold to a state licensed grain dealer. In the case of a failure in a state license warehouse, the indemnity fund will pay farmers 90% of a loss on grain up to a maximum of $150,000 per claimant.
However, grain sold using a credit-sale contract is not covered. Credit-sale contracts allow farmers to sell and deliver grain to a grain dealer, but payment to the farmer is deferred. If a credit-sale contract is not issued, the grain must be paid for upon demand, or in absence of a demand, within 30 days of delivery.
Grain sold on credit-sale contracts not covered
In these cases farmers give up title and become unsecured creditors of an elevator as soon as they deliver grain sold using a credit sale contract. Thus, a farmer's ability to be paid depends on the future solvency of the elevator.
The Grain Indemnity Fund was created by assessing one quarter of a cent per bushel of grain handled by warehouse operators and grain dealers. In addition, annual indemnity participation fees were collected from grain dealers license holders. These fees were ended on July 1, 1988, when the fund reached the $6,000,000 maximum balance allowed by law. The annual indemnity participation fees are still assessed once to each new license holder when they apply for a license.
The indemnity fund balance as of June 30, 2008 is $8,186,087. The fund balance has grown from its initial $6,000,000 maximum due to interest accruals and new licensee assessments. Since its inception in 1986, the indemnity fund has paid out $13,308,158 in claims; made $8,626,176 in recoveries, including repayments from bureau receiverships; and incurred a net loss on claims of $4,681,982.
Since 1986 the Grain Warehouse Bureau has handled approximately 27 grain receiverships for failed state licensed warehouse operators. More information about the Grain Indemnity Fund can be found on the Iowa Department of Agriculture's website at www.IowaAgriculture.gov/grainwarehouse.asp.