Wisconsin’s Agricultural Producer Security Payments Unfair to Dairy Industry

10:54AM Aug 22, 2014

Source: Cooperative Network

Wisconsin’s dairy industry is today requesting the Department of Agriculture, Trade, and Consumer Protection (DATCP) consider changes to its Agricultural Producer Security (APS) program and fund, which were designed to protect dairy, grain, and vegetable producers from the financial defaults of their buyers. The request comes after an out-of-state contractor’s nonpayment wiped out over half of the fund to reimburse 19 Wisconsin vegetable producers.

The vegetable processing industry had contributed just 8 percent of the total fund.
Prior to an APS program overhaul in 2002, APS securities and payments were held within each industry, for example, if a dairy contractor defaulted, security posted by that contractor only would reimburse dairy producers. The overhaul included a new fund intended to replace individual security and supplement with bonds in the event that a buyer’s default exceeded the fund’s capacity. The bonds, however, were never secured. Dairy, grain, and vegetable contractors still contribute to and maintain one indemnity fund—essentially forcing the three industries to subsidize one another’s defaults and to incur the same penalties.

As a result of the fund balance falling below $11 million, dairy processors and others will face renewed assessment payments, and fee credits for the program will likely cease in the coming year. Rebuilding the fund will take years and millions of dairy and other industry dollars.

In a joint memo being presented to DATCP today, Cooperative Network and the Wisconsin Cheese Makers Association express the following: "Our organizations were supportive of the 2002 changes to the APS program because of the unfulfilled promise that individual security would be replaced by blanket industry bonds. We have asked in the past for changes to the law that would protect dairy contractors from the impacts that a default such as Allens Inc. will have on the dairy industry. We continue to insist that such a change is appropriate."

The dairy sector had $7.6 million invested in the APS fund at the time of the $6.7-million Allens Inc. default in 2013. The last dairy industry default was in 2005 and resulted in APS payments totaling $130,000.

Cooperative Network will continue to work for a less costly and more efficient APS program, insisting on the commonsense approach that each industry’s access to the indemnity fund is limited to the balance each industry contributed to the fund.

Cooperative Network serves more than 600 Wisconsin and Minnesota member-cooperatives by providing government relations, education, marketing, and technical services for a wide variety of cooperatives including farm supply, health, dairy marketing, consumer, financial, livestock marketing, telecommunications, electric, housing, insurance, worker-owned cooperatives, and more. For more information about Cooperative Network, visitwww.cooperativenetwork.coop.