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by NALC Research Fellow Jeremy Garcia and Staff Attorney Emily Stone<\/em><\/p>\n On April 30, 2025, Indiana\u2019s governor signed SB461<\/a> into law. This bill<\/a> reformed the laws governing Indiana\u2019s Grain Indemnity Program by updating financial reporting, recordkeeping, and licensing requirements for grain buyers. Similarly, at the time of writing this article, a grain indemnity-related bill, SF608, has passed both the Iowa House of Representatives and Senate.<\/p>\n Grain warehouses and dealers play an important role in the grain marketing chains. Warehouses are facilities that will store grain for a producer, and a \u201cgrain dealer\u201d is a person or entity involved in buying, receiving, or exchanging grain from the grower. Grain indemnity funds provide important protection for farmers in circumstances where the grain dealer or warehouse becomes insolvent before payment is made for delivered grain. This article will discuss grain indemnity generally, provide specific examples from state provisions, and highlight the legislation in both Indiana and Iowa. For more information on regulations and requirements for grain dealers and grain warehouses, click here<\/a> to view NALC\u2019s Regulation of Grain Sales & Storage state compilation.<\/p>\n An indemnity program sets aside money for potential future losses. Grain indemnity statutes are state laws that create an indemnity fund to cover a portion of the value of a farmer\u2019s delivered grain when circumstances prevent grain dealers from making payments owed to farmers. These indemnity funds act similarly to an insurance policy; however, grain indemnity fund assessments are pooled and used to reimburse producers. Funds for state grain indemnity programs are generally collected from fees on grain sales. Currently, 14 states have implemented grain indemnity programs.<\/p>\n A need for grain indemnity programs was realized in the late 1970\u2019s. According to a 1985 Government Accountability Office (GAO) report<\/a>, 165 grain warehouse insolvencies were reported in eight grain-producing states from January 1974 to May 1982. 76 of these 165 insolvencies represented losses of over $35 million for grain producers. Some of these warehouse failures likely led to the creation of state grain indemnity programs, which have been in existence since at least 1980. However, it is unclear whether Oklahoma or South Carolina was the first state to create a grain indemnity fund. The GAO report detailed July 1980 as the creation date for Oklahoma\u2019s fund, while South Carolina\u2019s creation date was unclear, but its fund had \u201cbeen in existence for many years\u201d as of 1985.<\/p>\n Other early grain indemnity statutes were enacted by Illinois (1983), Ohio (1983), Kentucky (1984), Iowa (1986), and Tennessee (1989). Despite many state programs being established in the late 20th century, grain indemnity statutes are still being considered. The most recent grain indemnity fund was established by Minnesota in 2023 after it experienced an average of one grain elevator failure per year since 2015. Minnesota lawmakers initially funded their new grain indemnity program by allocating $10 million in state funds. If the fund falls below $8 million, additional funding will be collected in the form of fees on grain sales to first buyers. The statute can be found here<\/a>.<\/p>\n Grain indemnity funds are not necessarily universally popular with grain producers. Texas lawmakers passed grain indemnity legislation<\/a> in 2011 allowing Texas grain producers to vote on whether to implement a grain indemnity program. In 2017, Texas grain producers voted<\/a> against\u00a0establishing the fund, with more than 80% of votes cast being in opposition to initiating the program.<\/p>\n Although these statutes are all intended to compensate grain producers for losses, the administration and requirements for different funds vary. While not an exhaustive list, some differences include the amount of fees that are assessed, funding requirements, the percentage of grain value covered, type of grain sales that are covered, and claims processes.<\/p>\n The following hypothetical can help explain the significance of a grain indemnity fund: Imagine you are a farmer who has spent months cultivating a crop, going through all the challenges that a growing season brings. Weather, pests, etc. threaten your crops but you manage to get them harvested. You\u2019ve loaded up your trailers and delivered your grain to an elevator. Time to breathe a big sigh of relief, right? You can take the check that the elevator gave you to the bank, and all your hard work has finally paid off. At the bank, you learn that the check is no good. The elevator you delivered your grain to does not have sufficient funds to pay you. Now you are unable to sell your grain, and you haven\u2019t been paid.<\/p>\n In situations like the above hypothetical, a farmer is generally unlikely to recover funds through normal bankruptcy proceedings. This is because the farmer will likely be considered a \u201cgeneral creditor,\u201d and there is often little to no money left after paying \u201csecured creditors.\u201d Thus, grain indemnity funds are meant to compensate farmers who find themselves in this devastating position. Situations like these are not all uncommon, as is evident by recent grain buyer failures in Iowa and Indiana, where farmers have collectively been owed millions of dollars in recent years. For more specifics on bankruptcy law, visit NALC\u2019s Bankruptcy Reading Room<\/a>.<\/p>\n The following states have established grain indemnity programs: Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Michigan, Minnesota, Ohio, Oklahoma, South Carolina, Tennessee, Washington, and Wisconsin. These programs are the result of state lawmakers enacting statutes that provide for fund creation, and those statutes generally contain provisions including funding requirements, fee collection, coverage, and administration.<\/p>\n Funding requirements<\/em><\/p>\n Grain indemnity statutes generally include minimum and maximum funding requirements. This means that typically the provisions require a certain amount of money to always be present in the fund. For example, Indiana\u2019s program has a provision where fee collection begins when the fund dips below $20 million but is halted after the fund reaches $25 million. Ind. Code \u00a7 26-4-4-9<\/a>. Oklahoma\u2019s indemnity fund begins collecting if the fund drops below $6 million and halts collection at the end of the year when the fund exceeds $6 million. Okla. Stat. tit. 2, \u00a7 9-45<\/a>. Generally, fees on grain sales will not be imposed if a fund is above the required statutory threshold.<\/p>\n Fee Collection<\/em><\/p>\n State grain indemnity statutes also typically include provisions that determine the amount of fees, when the fees are determined, and which party in a transaction pays the indemnity fund fees. For example, Idaho\u2019s indemnity statute outlines that grain producers are solely responsible for paying fees. Idaho Code \u00a7 69-256<\/a>. Indemnity fund fees on grain sales in Idaho is not to exceed more than two-tenths of one percent (.2%) at the time of the first sale. Idaho Code \u00a7 69-257<\/a>. Despite the requirement that grain producers pay the fees, grain buyers are expected to collect the fees and pay them to the indemnity fund. To illustrate this, suppose a farmer delivers $50,000 of grain during an active fee collection period in Idaho, a $100 fee (.2 percent of 50,000) is taken for the indemnity fund at the time the farmer sells it to the first buyer.<\/p>\n Coverage<\/em><\/p>\n Statutes also identify what crops are covered, how much of the grain\u2019s value a farmer can recover through the indemnity fund, and time limits for filing claims. For example, Kentucky\u2019s grain indemnity statute defines \u201cgrain\u201d as \u201ccorn, wheat, soybeans, rye, barley, oats, grain sorghums, or popcorn.\u201d Ky. Rev. Stat. \u00a7 251.385<\/a>. The same crops are covered by Indiana\u2019s statute. Most state indemnity funds cover sales to grain warehouses and grain dealers, however, Oklahoma\u2019s grain indemnity statute only covers grain warehouses.<\/p>\n There is a lot of variability between statutes on what percentage of the grain\u2019s value a farmer can recover under different sale terms. For example, credit sale contracts are covered at a lower percentage than regular sales. In a credit sale contract, grain producers are paid at some point in the future for grain that is delivered immediately. The price can be determined at time of delivery or may also be determined in the future. Credit sale contracts are also referred to as price later, deferred payment, deferred price, basis-only, and minimum price contracts. Most states cover both cash transactions as well as credit sale contracts. Some states such as Washington<\/a> and Oklahoma<\/a> pay claims at 100% of grain value for cash sales, whereas Iowa<\/a> pays 90% of grain value. However, there are per claimant limits, as Washington<\/a> covers 100% up to $750,000 per claimant, while Iowa<\/a> covers up to $300,000 per claimant. Most states cover credit sale contracts at a lower percentage of overall grain value, reflecting the increased risk in price volatility that is inherent in credit sale contracts, where the price for the grain can be determined later. For example, Washington covers credit sale contracts at 80% or 75%, depending on how many days the contract delays payment for delivered grain Wash. Rev. Code \u00a7 22.09.451<\/a>. For specifics on each state\u2019s program and grain value, click here<\/a> to review NALC\u2019s Regulation of Grain Sales and Storage state compilation.<\/p>\n There are also limits on how long grain producers have to file claims. For example, in Idaho, if a grain producer receives notice of a grain buyer failure from the state, then the grain producer has 90 days to file a valid claim against the fund. Without a notice, the grain producer must file a claim within 2 years. Idaho Code \u00a7 69-263<\/a>.<\/p>\n Administration<\/em><\/p>\n Grain indemnity statutes identify which state agency oversees administration of the fund, how claims are paid if the fund is depleted, and whether grain producers can opt out of the fund. For example, the Indiana Grain Buyers and Warehouse Licensing Agency, a division of the Indiana State Department of Agriculture, oversees Indiana\u2019s fund. Ind. Code \u00a7 26-3-7-1<\/a>. Indiana\u2019s statute allows the agency to borrow money to cover claims in excess of available funds in the indemnity fund. Ind. Code \u00a7 26-4-6-8<\/a>. In contrast, Washington\u2019s statute requires that only funds from the state\u2019s grain indemnity fund may be used to cover claims, and that claims exceeding available funds will be paid as the money becomes available in the indemnity fund. Wash. Rev. Code \u00a7 22.09.461<\/a>. Washington\u2019s fund is administered by the state\u2019s agricultural department, but the grain indemnity statute also creates a grain indemnity fund advisory committee. Wash Rev. Code \u00a7 22.09.436<\/a>. Some states, such as Minnesota, allow grain producers to opt out of the indemnity fund, and those procedures are outlined in the statute. Minn. Stat. \u00a7 223.26<\/a>. Minnesota\u2019s indemnity fund is administered by the Minnesota Department of Agriculture. These are just a few examples of the variety of administrative provisions that can be found in state grain indemnity statutes.<\/p>\n Indiana<\/em><\/strong><\/p>\n In 2020, a grain elevator in Indiana called Salamonie Mills declared bankruptcy, leaving over 150 farmers without payment for grain they had delivered to Salamonie Mills. Although the elevator officially declared bankruptcy in 2020, its net worth was reportedly negative $6.6 million at the end of 2018. Indiana requires grain dealers to have a positive net worth in order to be issued a license each year, but the Indiana Grain Buyers and Warehouse Licensing Agency (IGBWLA) allowed Salamonie Mills to continue operating. Following the grain elevator\u2019s failure, farmers that were not reimbursed by the state grain indemnity fund filed a lawsuit. The main issue in the litigation was whether the March 2020 failure date as determined by the IGBWLA was proper. The failure date was important because the grain indemnity fund would only cover losses for farmers within 15 months before the determined failure date. Finally, in April 2024, the Huntington County Superior Court held<\/a> that Salamonie Mills should not have been reissued a license after 2018, and that the failure date would be changed to December 31, 2018. This decision brought the total recovered by farmers because of the elevator\u2019s failure to over $7 million.<\/p>\n In addition to formal litigation proceedings, questions remained regarding the IGBWLA\u2019s failure to suspend the insolvent elevator\u2019s license earlier. Since the elevator\u2019s failure, IGBWLA has undergone an audit, and the new director of the agency has reported that the agency has updated protocols to avoid similar issues. Further, Indiana enacted a bill<\/a> in its 2025 legislative session aimed at updating licensing, recordkeeping, and financial reporting requirements for grain buyers in the state. Some notable changes include updates to the required net worth for grain banks, warehouses, grain buyers, and buyer-warehouses to retain licenses, a new process for \u201cinformal meetings\u201d called by the director of the Indiana grain buyers and warehouse licensing agency with a licensee, and language requiring that a licensee with multiple facilities must obtain a license that covers all facilities operated by that person. Additionally, the new law reforms the process for reapplying for a grain buyer\u2019s license and revoking the license \u2013 including a provision that automatically revokes the license if a licensee has filed a voluntary bankruptcy petition. A brief summary of Indiana\u2019s grain indemnity fund can be found here<\/a>.<\/p>\n Iowa<\/strong><\/em><\/p>\n For 30 years, the Iowa\u2019s grain indemnity fund did not collect any premiums from grain producers. This changed in 2023, after a string of grain buyer failures in 2021 and 2022 nearly\u00a0depleted the fund. In 2021, a soybean dealer called Global Processing filed for bankruptcy, with the Iowa Grain Indemnity Fund paying out more than 2 million dollars to farmers as a result. In 2024, the owner of Global Processing was indicted<\/a> by a federal grand jury on charges that he stole over 4 million dollars from farmers. Other recent Iowa grain buyer failures include Pipeline Foods<\/a> in 2021, and the B&B Farm Store<\/a> in 2022, costing the indemnity fund $494,000 and $1.2 million respectively. As a result of these failures, Iowa\u2019s grain indemnity fund only held $312,000 at one point, far below the state\u2019s statutory $3 million-dollar minimum reserve threshold, triggering premium collection to replenish the fund. In response to this, bills to modernize the fund were introduced in both the 2024 and 2025 sessions of the Iowa Legislature.<\/p>\n The 2024 bill<\/a> was passed by the Iowa Senate but failed to pass the Iowa House of Representatives before the legislative session expired. This bill would have increased the minimum funding requirement from $3 million to $8 million and maximum funding requirement from $8 million and $16 million. A similar bill is making its way through Iowa\u2019s legislature this year. SF608<\/a> has passed Iowa\u2019s Senate and House but has not yet been signed by the governor into law. The original bill<\/a> would\u2019ve increased the minimum funding requirement to $5 million and the maximum funding requirement to $12 million. However, an amendment<\/a> adopted in the House mirrors the legislation from 2024 in regards to funding requirements. Additionally, the amendment created two categories of credit-sale contracts \u2013 deferred-payment contracts and deferred-pricing contracts. Deferred-payment contracts, where the dealer and seller agree on a price but payment occurs more than 30 days past delivery date, will be ineligible for indemnity claims. Conversely, deferred-pricing contracts where the grain was delivered without an agreed-upon price can claim indemnity for 75% or up to $400,000 of their losses. The version of the bill that includes the amendment has been adopted by both the House and Senate. The Iowa Department of Agriculture and Land Stewardship did announce last month that the fund, which currently sits above $10 million, would stop collecting fees in September of this year for the first time since September 2023.<\/p>\nGrain Indemnity Generally<\/h4>\n
How do grain indemnity programs work?<\/h4>\n
Specific Grain Indemnity Provisions<\/h4>\n
Recent Grain Indemnity developments:<\/h4>\n
Conclusion<\/h4>\n