By Jared Strong
The Iowa Grain Indemnity Fund Board on Monday rejected nearly $1.5 million worth of claims from people who sold grain to a now-defunct soybean dealer.
That represents about 41% of the losses that farmers and others sought to recoup in the wake of Global Processing Inc.’s bankruptcy late last year.
The main reason for those rejections was that several soybean producers made claims on grain sales that happened more than six months before the state suspended Global’s grain dealer and warehouse licenses in October. By law, those deliveries needed to happen on or after April 24, 2022, to be eligible.
The board oversees operation of a state fund that pays farmers 90% of their losses — up to $300,000 — when they aren’t compensated by a grain dealer or aren’t able to retake their stored grain from warehouses.
The indemnity fund was created amid the 1980s farm crisis and is meant to protect farmers from grain dealer and warehouse bankruptcies. The fund has dwindling reserves and is the subject of proposed legislation that might overhaul its funding mechanisms. Under current law, a tax on farmers’ grain is set to reactivate in July to replenish the fund.
There are several conditions that claimants must meet to be eligible for payouts from the fund. Aside from the six-month requirement, the sales must also occur in Iowa and have to be the first sales of the grain.
Some of the claims pertaining to Global, which is based in Kanawha in northern Iowa, were rejected wholly or in part because soybeans were delivered to its location in Hope, Minnesota.
Minnesota lacks the protections that Iowa has for dealer and warehouse failures. Pending legislation in Minnesota would create a similar indemnity fund.
But the bulk of the rejections on Monday happened because the sales were too old.
Larry Sharer of Jewell, made claims that totaled about $800,000, but they pertained to sales that dated back to 2019. In the end, he got about $60,000 from the fund.
“It just baffles me that there’s some big ones in here that don’t get paid for that reason,” board member Lori Goetzinger said.
More than 10 of the 46 claims were wholly or partially rejected because of sales that were older than six months.
It’s unclear why Sharer and others did not seek payment for those grain sales earlier. Sharer declined to comment about that but said he had anticipated parts of his claims would be rejected. He said lawmakers should consider loosening the time restriction.
Iowa law requires grain buyers to pay within 30 days, and producers can seek help from the Iowa Department of Agriculture and Land Stewardship to force those payments.
“In most of the cases, they just never mailed the check out to the producer,” James Kennedy, chief of IDALS’ Grain Warehouse Bureau, said of Global’s outstanding payments. “They would put it in a drawer.”
There were a total of 46 claims made to the board related to Global’s bankruptcy that totaled about $3.6 million.
The board approved 35 of the claims — either in whole or in part — for a total of about $2.1 million.
That means that the indemnity fund will not run out of money in the near future.
As of the end of March, it had a bit less than $2.4 million. After the approved claims, the fund will have about $250,000. Claimants have 20 days to appeal the board’s decisions.
Generally, the fund is meant to operate with balances between $3 million and $8 million. When its balance drops below $3 million, a quarter-cent-per-bushel fee is charged by the state on farmer grain sales until the fund reaches the upper threshold. That fee has not been charged since 1989.
The dollar amount for the rejected Global claims is the highest ever for any single bankruptcy in Iowa, according to IDALS data. The next highest was about $975,000 for Aplington Elevator Co. in 1991.
Iowa Capital Dispatch is part of the States Newsroom, a network of similar news bureaus supported by grants and a coalition of donors as a 501c(3) public charity.