Minnesota law creates new farmer safety net for grain elevator sales

Gov. Tim Walz signed into law last week a safety net to reimburse farmers who sell grain to elevators that go bust before receiving payment.

The program seeks to minimize harm caused to the state's crop growers by a grain elevator's financial collapse, an increasingly common occurrence that has led some producers to the brink of insolvency in recent years.

Last year, Global Processing filed for bankruptcy, leaving more than $1 million unpaid to farmers. In 2021, Pipeline Foods also filed for bankruptcy, resulting in more than $5 million in losses for farmers.

While more than a dozen states provide grain indemnity funds, including Iowa and North Dakota, Minnesota's program will be more generous. It could also be easier than it is in neighboring states for farmers who wish to opt out of the fund to avoid paying into it.

And to the consternation of some critics, the fund will also be replenished by farmers' payments.

The Minnesota program, which will kick off with a one-time spend of $10 million from the legislature, will pay 100% of proceeds to farmers who make cash sales with elevators within 180 days of the buyer's default.

By contrast, Iowa's program, which was established during the farm crisis of the 1980s, covers 90% of a farmer's loss, up to $300,000. North Dakota farmers can see up to 80% of lost payments reimbursed up to a maximum of $280,000.

Like other indemnity funds, fees on grain sales will be triggered to replenish the fund up to $15 million when proceeds are distributed to shore up farmers' losses. Minnesota set that bottom threshold at $8 million.

Iowa replenishes indemnity funds by tacking fees onto grain dealers and warehouses, which state law notes "can be passed onto" farmers. North Dakota tacks a fee onto farmers engaging in a credit-sale; that's when producers have delivered grain to an elevator but have not yet been paid, said Shaun Quissell, grain and livestock licensing division director with the North Dakota Department of Agriculture.

Minnesota's program will similarly impose a small fee — not to exceed 0.2% of a grain sale — on farmers. Often, the fee will be much less, said Stu Lourey, Minnesota Farmers Union's government relations director.

"If you had a really massive failure — say $5 million, about as big as Pipeline [Foods] and Global [Processing] combined — that would require the commissioner to raise $10 million in the following year that would require a 0.07% assessment on sold grain. That's $7 dollars on every $10,000 of marketed grain."

While these premiums are mandatory in North Dakota and Iowa, Minnesota farmers can opt out of the program by applying for a rebate from the ag commissioner.

That provision drew criticism from Sen. Torrey Westrom, R-Elbow Lake, the ranking member of the Senate agriculture committee, who this past session likened the opt-out to a rebate at Menard's, which he argued often goes unclaimed.

"I still think we can do a better job of coming up with a voluntary, easier way for farmers to opt-in if they so choose," Westrom told the committee in March.

Minnesota Farmers Union President Gary Wertish noted his group has sought the backstop since the elevator in Porter went belly-up in 2015. Other supporters have suggested the premium is a small price to pay to make farmers whole again.

Martin and Lisa Phillips, farmers south of Mankato who lost more than $112,000 when Pipeline Foods filed for bankruptcy, told senators this spring the fee would be a "small price to pay" for better protection.

An earlier version of this story misstated the location of the grain elevator that filed for bankruptcy in 2015.