Grain is loaded into a trailer.
State agriculture agencies are floating draft legislation that would require grain buyers to be licensed in the state before conducting business.
The proposal comes in response to the collapse of Turner Grain Merchandising Inc. of Brinkley, which has left farmers without pay and tens of millions of dollars in jeopardy. The issue is expected to be one taken up by the 90th Arkansas General Assembly in January.
Arkansas Secretary of Agriculture Butch Cahoun and Terry Walker, assistant director of the State Plant Board, presented the draft legislation to the state Agriculture Board on Wednesday.
More: View the draft legislation here (PDF).
The draft is the result of extensive research of grain dealer laws in several other states. Walker said nothing is final, and changes are expected.
“We hope it will bring some stability to the producer side in that grain sales are somewhat protected, and operations are regulated,” Walker said.
As in the latest version of the draft, any person wanting to operate as a grain buyer in Arkansas would be required to secure a license from the State Plant Board, the regulatory agency.
Grain buyers would have to meet the following requirements:
- A minimum net worth of $50,000.
- 1:1 ratio on grain sales and purchases.
- Post additional bond, letter of credit, cash or other assets acceptable to the board in the event an audit reveals a negative financial position.
Licenses would be good for one year, from July 1 of the issuing year to June 30 of the following. Exemptions would be made for those that purchase grain, less than 1,000 bushels in a year, for home use.
Grain buyers would also be required to pay a yearly license fee. For buyers purchasing 100,000 bushes or less, the fee would be $100.
For every 150,000 bushel increment past 100,000 bushels, the license fee would increase $100. The maximum license fee would be $500. Buyers would also be required to meet bond and insurance requirements.
The draft also contains a section pertaining to a voluntary indemnity fund to help producers recover money when a buyer fails to pay. The maximum award available to individual producers would be $750,000, and the indemnity fund would have a $25 million cap.
The current draft states producers would receive 100 percent of the maximum award if failed payments are reported to the State Plant Board within 21 days of the missed payment. The report would result in an audit.
“The thinking is if early reporting of a potential problem is done, the scope of the losses will be less,” Walker said.
If producers wait past the 21-day period, payment will decrease to 85 percent.
Walker said talks with producers around the state has been mixed.
“Some people are highly aware and want to have assurances that there is some regulation,” he said. “Others don’t care because their crop is taken from the field, and are paid immediately. It’s a wide array of responses.”
To date, there have not been talks with legislators about the draft legislation, Walker said.
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