Failure of Jesup Grain Dealer Opens Window for Grain Indemnity Fund Claims
On August 23, 2022, the Iowa Department of Agriculture and Land Stewardship (IDALS) announced that the court-appointed receiver for B & B Farm Store Inc., a grain dealer and warehouse operator from Jesup, Iowa, had consented to a voluntary revocation of its Iowa warehouse and grain dealer licenses. This revocation followed IDALS' August 19 suspension of the company’s licenses based upon its failure to pay for priced grain, grain shortage, and record keeping violations under Iowa Code chapters 203 and 203C. On August 12, 2022, Farmers State Bank filed a foreclosure petition in Buchanan County District Court, against the company and its affiliates. The petition alleged that the companies had defaulted on multiple promissory notes, totaling $4,647,757.24. On August 15, District Judge John Sullivan appointed Habbo Fokkena as a receiver for the companies’ property.
Producers who have not been paid by B & B Farm Store, Inc. for their sold and delivered grain may have a remedy with the Iowa Grain Depositors and Sellers Indemnity Fund (Fund). In general, the Fund will pay 90 percent of a claimant’s loss, up to $300,000. There are some exclusions, however, most notably credit-sale contracts. The Fund does not compensate producers for losses under these contracts. Credit-sale contracts include deferred pricing contracts, price-later contracts, and deferred payment contracts. Deferred payment contracts are cash contracts to be paid more than 30 days after the delivery of the grain to the buyer. Fund coverage is also limited to sales that took place within six months of the incurrence date (the date the license was revoked). Finally, the payment of claims are subject to Fund availability. The current Fund balance is approximately $3.4 million. The Des Moines Register has reported that approximately 60 farmers have claims estimated at $1.3 million against B & B Farm Store.
Producers have 120 days from the incurrence date to file a claim. Thus, eligible producers must file their claims by December 18, 2022, to receive compensation from the Fund. Claim forms are available from IDALS by calling 515-281-5324 or by going online to the IDALS Additional Resources Page.
Background of the Fund
The Iowa Legislature created the Fund in 1986 to protect producers from catastrophic losses arising from selling grain through an Iowa-licensed dealer or from storing grain in an Iowa-licensed warehouse. S.F. 2116 (1986 Iowa Acts, Chapter 1152).
Under current law, the Fund continues to provide some protection to producers with grain stored in an IDALS-licensed warehouse and to producers who sell grain through an IDALS-licensed grain dealer. Iowa Code § 203D. When the producer faces a loss, the Fund pays 90 percent of the loss, for a maximum of $300,000 per claimant. Iowa Code § 203D.6. If claims were to exceed the amount of the Fund, the general fund of the State is not liable for claims presented against the Fund. Iowa Code § 203D.3.1. The Fund’s revenue sources include annual licensing and participation fees, investment income, and recoveries of losses from receiverships or legal recoveries. In recent past, the Fund’s primary source of revenue has been investment return. The Board annually reviews the debits and credits to the Fund and determines whether to impose the participation fee and the per-bushel fee governed by Iowa Code § 203D.3A. These participation fees have been largely waived since 1990, but if the Fund dips below $3 million, the Grain Indemnity Fund Board must reinstate them. The participation fee is fourteen thousandths of a cent per bushel of grain purchased (with a minimum of $50), and the per-bushel fee is not to exceed one-quarter cent per bushel. Once imposed, the fees are suspended when the assets of the Fund exceed $8 million, less any encumbered balances or pending or unsettled claims. A newly licensed grain dealer must pay a license fee and a one-time participation fee, even when other fees are suspended.
Claims against the Fund are not common occurrences. Since 1998, there have been 12 events triggering recoveries against the Fund. Only one of those occurred after 2010.
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