Menu

by Lynn Snyder

Just as farmers put thought and research into which seed and equipment they will use, they also should research and carefully consider the grain elevator they choose to do business with, according to the Ohio Department of Agriculture.

David Schleich is the chief of the department's Plant Industry division. He said that it is vital that farmers treat the relationship with their local elevator as a business relationship.

Ohio Department of Agriculture's (ODA) Grain Warehouse Section examines grain elevators to make sure they are in compliance with the law. The Grain Warehouse Section routinely inspects grain elevators, and elevators are required to submit an annual financial statement with the department. In the event that the department discovers inconsistencies, the elevator's agricultural commodity handler's license could be suspended. This means the business is prohibited from selling, transferring or otherwise disposing of grain as a result of the suspension. It also could mean that farmers doing business with the elevator could lose money.

The section administers the Ohio Grain Indemnity Fund, which reimburses farmers when a licensed elevator becomes insolvent. Since it was established in 1983, the fund has reimbursed farmers more than $4.1 million. It is funded through a half cent per bushel assessment on grain marketed at licensed elevators in Ohio, collected from July 1983 through December 1985. The assessment is collected only if the fund drops below $4 million. ODA said the recent insolvency of Bobb Bros. Grain in Highland County is expected to result in the largest-ever payment to eligible grain depositors from the Ohio Grain Indemnity Fund since it was established. The fund now stands at more than $6.7 million.

Schleich said farmers need to be able to present the proper paperwork in order to receive a payment from the indemnity fund.

"Farmers must understand they are making a marketing transaction when they deliver grain to an elevator," he said. "To get anything, they've got to produce a scale ticket and all pertinent records." Schleich likened the grain being delivered to cash, and he encouraged farmers to be sure to acquire documentation from the elevator and keep it in a safe place should they ever need to produce it. "An ounce of prevention is worth a pound of cure," he said, noting that the grain they're delivering is an asset to them and provides income for the farm.

Schleich said even with all the right paperwork, scale tickets and documentation, getting payment from the Grain Indemnity Fund takes at least three to four months. There is a complex set of checks and balances in place to verify payments to farmers. If farmers do not have the proper documentation, Schleich said request for payment can involve hearings. He added there's nothing ODA can do to speed the process up.

In Schleich's experience, he has identified several red flags that he considers warnings to farmers when dealing with grain elevators:

• Farmers need to check to determine that they are dealing with a licensed handler – is the license posted in a conspicuous place? If not, ask to see it, or call ODA to find out if the business is licensed.

• Is the elevator paying more than others in the area?

• Is the elevator providing a service others – even farmers – can't provide?

• Does the elevator offer interest on your account? Schleich said to remember that elevators aren't lending institutions. You should collect your money in a timely manner and put it in the bank.

• Beware of prepaying. "If a business goes away, you are dealing with an unsecured creditor," he said, and could lose your money.

• Did a check from the elevator bounce? If so, contact ODA, he said. The reason could be just a simple mistake, but it could be because the elevator doesn't have sufficient funds.

• Free storage or free services. "These are just red flags to us," he said.

ODA Director Fred Dailey offered farmers the following advice to help protect themselves from losses in the event of a grain elevator insolvency:

• Only deal with licensed handlers. To find out if your handler is licensed, call the department.
• Save scale tickets or delivery receipts, as they will be required to verify an indemnity claim. An intermediary handler, hauling from the farm to a terminal, must issue a ticket or delivery receipt to the producer from the elevator responsible for the obligation.
• Regularly collect payments. The fund does not cover payments not collected within 12 months of pricing.
• Understand contracts before signing them. A contract is a binding agreement between the elevator and the producer, and contract disagreements are civil matters that must be handled by the courts.
• If you believe something may be abnormal with your grain elevator’s business practices, call the department at 614-728-6270 or toll-free at 800-282-1955.