In times of economic uncertainty and unrest, assurance of one’s livelihood can be a welcomed comfort. Because of this, agricultural producers in Ohio should be aware of the grain regulatory program and Ohio ‘s indemnity program that provide a safety net for excessive losses due to insolvency of grain handling businesses. Since 1983, the indemnity fund has proven effective with the reimbursement of more than $8 million to Ohio grain producers. Understanding how the indemnity fund money is allocated is important to everyone that is involved in the handling and depositing of grain in Ohio .
The Ohio Department of Agriculture (ODA) licenses agricultural commodity handlers in Ohio to provide protection to commodity depositors. A handler is any person or entity who purchases more than 30,000 bushels of commodities in a calendar year from producers or provides any type of commodity marketing transaction. Handlers are required by law to be licensed by ODA. A commodity depositor is any person who delivers an agricultural commodity to a licensed handler for storage, conditioning, shipment or sale. In addition, a depositor is any owner or legal holder of a ticket or receipt issued for an agricultural commodity who is a creditor of the handler for the value of the commodity. Licensing requires that an application be filed, fees paid, insurance provided on inventory, and at least a review level financial statement be submitted with applicable notes prepared by a Certified Public Accountant.
The indemnity fund was created by allocating a one-half cent per bushel fee for all commodities handled by a licensed handler. This allocation should not be confused with a commodity check-off program, which is used for research and promotion purposes.
Three years ago, leaders of the agriculture industry raised the cap on the indemnity fund to $10 million to account for higher commodity prices and the increased size of Ohio ‘s grain handlers. The current balance of the fund is more than $12 million, including accumulated interest. The one-half cent per bushel assessment is reinstated if the fund balance drops below the $8 million mark.
Early warning signs of a grain handler’s cash flow problems may include checks returned for insufficient funds, failure to be paid in a timely manner (within five working days) or promises to pay interest if the seller does not take payment.
The Director of Agriculture holds a priority lien on assets of a failed handler for the benefit of the depositors. Statute 926.01 of the Ohio Revised Code was implemented in 1988, and was tested and prevailed in the Merchants Grain insolvency.
Indemnity claims from a failed handler are reviewed by the Commodity Advisory Commission made up of three farmers, three commodity handlers, and one banker involved in agricultural lending. The Commission determines the price of the claimed commodities according to the law and makes approval recommendations on the claims.
The amount of reimbursement that depositors will receive depends upon their marketing transaction or other circumstances. For guidance on a specific case, contact the Grain, Feed and Seed Section of ODA. If the indemnity fund is depleted due to the failure of multiple handlers, claims will be paid in the order received by the department as the fund is replenished.
It is imperative that farmers keep complete and accurate records of their commodity deposits and understand the marketing transactions in which they are involved. Producers must keep copies of all scale tickets and settlement sheets. Producing complete and accurate receipts of your transactions could be the determining factor in claim approval.
Claims take time to approve as they move through the legal system of required checks and balances. Although payment isn’t immediate, this is a priority for the department and every attempt is made to assist claimants within the scope of ODA’s authority.
Agriculture has changed drastically in the last decade, and high commodity prices and market volatility are major concerns to licensed handlers, farmers and agricultural lenders. If you need our assistance or more information, call the Grain, Feed and Seed Section of ODA at 614-728-6410.