About three dozen of the 50 states have state statutes for grain dealers and grain warehouses.
“They get a lot of attention when there is a dealer failure or a warehouse failure,” says Ross Pifer, Penn State University, Center for Agricultural and Shale Law.
Why State Statutes Exist
“When you have a grain dealer that doesn’t make a payment to farmers, obviously the farmers are not being paid. It’s not one farmer that’s not being paid. Normally, it’s a large number of farmers that aren’t being paid, and then those farmers are going to be under financial stress, and they may not be able to pay some of their suppliers. And so the impact of a grain deal or a grain warehouse failure really ripples out and can have a large impact on the local or regional ag community.”
Pifer says each state has a unique set of provisions in the individual state statutes, so it’s important to know what your state’s may or may not provide. As such he offers two resources on where to get started:
In most cases, there are distinct statutes for grain dealers and grain warehouses as well with definitions for each of those businesses.
What Should Be Generally Understood About How These Protect Farmers?
Because of the concentration of money at grain dealers and warehouses that can amount to individual farmer financial implications as well as local economy effects, states have put into place regulations for grain dealers and warehouses.
“At a basic level, we want to make sure that growers are getting paid, we want to make sure that that there are funds in place when you have a dealer that doesn’t make payments,” Pifer says.
He provides eight general provisions these statutes may include:
Licensing: 34 states have grain licensing statutes, and it’s required in about 32 states, and generally the license must be renewed annually
Auditing: required in approximately 31 states for basic information on each sale: growers name, date of sale, condition of grain and amount paid. The time period varies from 1 year to 6 years
Prompt Payment: required in 11 states, and usually specifies payment within 30 days of delivery or 6 months.
“I question why more states don’t have this in their statutes because it is an early indicator of potential issue or developing issues,” Pifer adds.
Failure to pay: included in 14 state statutes to appoint a receiver or trustee and procedures for seizure of assets
Bonding: 30 states have requirements for purchasing a bond which can be drawn on for payment in the event of default, and most of those states require a surety bond
Indemnity Fund: 13 states have statutes to establish an indemnity fund with details on assessments and claim distribution process.
[11 states have bonding and indemnity funds in state statute]
Statutory Liens: 10 states provide for these and detail attachment, duration and priority
Penalties: Almost every state with a statute addresses penalties—civil and criminal
