Warehouse Licensing Process Still Works

Warehouse Licensing Process Still Works

Action a reminder to be careful about grain dealings.

The specter of what can happen when grain elevators run into difficulty reappeared recently when the Indiana State Department of Agriculture issues an official notice on behalf of the Indiana Grain Buyers and Warehouse Licensing Agency. The Agency accepted the surrender of license by Clinton Center Feed, Inc., in Elkhart County.

The surrender of the Indiana Buyer/Warehouse license means that the company can no longer act as a grain warehouse or grain buyer. It is unlawful for them without a license to accept grain for storage, grain bank, warehouse receipt, deferred pricing or other merchandising practice.

No other details were immediately available. However, with farmers now delivering grain to elevators, it's a good time to brush up on what rights you have and don't have when placing grain under different types of storage situations. With elevator storage expected to be plentiful this fall, according to Chris hut, Purdue University Extension ag economist, based on a short corn crop in Indiana, elevators may be competing for customers to recoup money on their storage space instead of letting it set empty for the year.

Problems started more than 30 years ago when deferred pricing was a common practice. One of the elevators that went bankrupt was a community elevator near Edinburgh. Later bought out and expanded into a successful business by Kokomo Grain, based in Kokomo, when the original business couldn't meet its obligations, farmers who had grain on deferred pricing, learned that they didn't actually have title to the grain. The title transferred to the elevator when they delivered the grain and placed it on the option to price it later.

Farmers who get warehouse receipts still retain title to the grain. In the case of a bankruptcy or other problem with an elevator, holding a warehouse receipt puts you in a better position as a creditor than someone with grain on delayed or deferred pricing. The practice is still used, but the core is still not as safe for the farmer placing the grain in that option as other ways he could choose to store his grain.

The bankruptcy at Edinburgh mentioned above happened more than 30 years ago, before the Indiana Grain Warehouse Indemnity Fund was created. Money for the fund was raised by a check-off on farmers selling grain. Then it was capped. Currently, no money is collected for the Grain Warehouse Fund. Its role is to help cover losses of farmers in case an elevator defaults and farmers are left holding the bag.

The best advice is to understand your rights and who has title to the grain when you choose a selected method of storage at your local elevator. It also goes without saying that you need to have knowledge of how stable the elevator is where you deliver grain and put it on some sort of storage.
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