Capitol Letters: House agriculture committee passes grain indemnity program update

State Rep. Megan Jones

On Tuesday, Feb. 18, the Iowa House Agriculture Committee passed House Study Bill 131 by a bipartisan vote of 21-1.

HSB 131 makes a number of modernizing changes to the state grain indemnity program which is now nearing 40 years old. Since the 1980s, when this program was created, Iowa production of grain has nearly doubled as have grain prices. Additionally, the rise of special grain sales such as for organic grain has create unforeseen risks in the program which in part precipitated the reinstatement of indemnity fees in 2023 when the Indemnity fund was drawn down by the bankruptcy of several specialty grain purchasers. Additionally new ways of selling grain have proliferated with some have significant risks.

HSB 131 proposes new definitions and regulations surrounding credit-sale contracts sale of grain, specifically extending grain indemnity coverage to deferred pricing credit sales contracts, but not to deferred payment credit-sales contracts since the bill’s language explicitly differentiates between deferred-pricing and deferred-payment contracts. The bill modifies the conditions under which indemnity fund fees are assessed and outlines the process for indemnification claims. The changes aim to enhance the financial security of grain depositors and sellers while clarifying the responsibilities of licensed grain dealers. HSB 131 was amended in committee to further clarify which credit-sale contract will be covered under this legislation with deferred pricing being covered and deferred payment not. The amendment also struck provisions in HSB 131 that required grain dealers offering credit-sale contract to submit an unqualified audit and instead increased the bond that grain buyers must post with the Iowa Department of Agriculture and Land Stewardship from $100,000 to $250,000. The new amount is essentially a cumulative inflation adjusted of the mid-1980’s amount.

Key aspects of HSB 131 as passed by the committee include:

• Defines “deferred-payment contract;” and defines “deferred-pricing contract” under credit-sale contracts and clarifies participation and per-bushel fee payment timelines.
• Establishes that the per-bushel indemnity fees will only be assessed on grain sold under credit sale contracts deferred-pricing contracts, but not deferred-payment contracts.
• Strikes provision of current law that allowed the use of grain indemnity fund money to fund IDALS administration of grain indemnity program and regulation of grain dealers.
• Increases the thresholds for waiving and reinstating indemnity fees from $8 million to $16 million and from $3 million to $8 million, respectively.
• Clarifies the process for indemnification claims, prioritizing depositors and sellers while specifying differing payout limits based on the type of contract:

- Cash sale and depositor covered grain getting 90% of price for losses amounting up to $300,000,

- Deferred pricing covered grain getting 70% of price up to ~$210,000.

Contact Jones by email at megan.jones@legis.iowa.gov