Ohio Legislature Revises Agricultural Commodity Handler’s Law

Peggy Kirk Hall, Asst. Professor, OSU Extension Agricultural & Resource Law Program

The Ohio Senate concurred with the House of Representatives yesterday to enact changes to Ohio’s Agricultural Commodity Handler’s law, commonly known as the Grain Indemnity Fund.  According to the bill sponsors, the changes will better protect Ohio farmers from grain elevator insolvency by raising the fund cap from $10 to $15 million and increasing the minimum fund balance trigger for the per bushel fee assessment from $8 to $10 million.

The Ohio Legislature originally created the Grain Indemnity Fund in 1983 to reimburse farmers when a grain handler becomes insolvent.  The law requires licensing of all grain handlers, who pay a 1/2 cent per bushel fee on grain handled to maintain a minimum balance in the indemnity fund.    In the case of a grain handler’s financial failure, a farmer is reimbursed 100% for open storage grain in the elevator and 100% of the first $10,000 of a loss  for future contracts, delayed price and basis transactions, with 80% reimbursement beyond the first $10,000 of loss.  The legislature raised the indemnity fund’s required minimum balance to $10 million in 2005.

Ohio Department of Agriculture handles the fund, which paid out $4.1 million to farmers in grain insolvency cases in 2011 and its highest payout of $2.5 million for one elevator in 2004.   The fund currently is around $8.2 million, but bill sponsors believe that payouts similar to those of the past could nearly bankrupt the fund under today’s grain prices.  Changes to the fund cap and the assessment trigger should prevent depletion of the fund, according to bill sponsor Senator Cliff Hite.

The legislation also changes grain lien priority rules, revises licensing requirements for commodity handlers and increases discretion for the ODA Director to determine the validity of claims.  The following summarizes these and other provisions in the legislation:

  • Increases the Grain Indemnity Fund’s minimum balance from $8 to $10 million and its maximum balance from $10 to $15 million.  ODA cannot assess the per bushel assessment on handlers outside of the minimum and maximum balances.
  • Gives priority to the automatic lien established and held by ODA in the event of a commodity handler’s failure or insolvency.  The lien will now have priority over all competing lien claims asserted against the commodity.
  • Requires a commodity handler whose license is revoked to immediately notify all parties storing agricultural commodities in the handler’s warehouse and all holders of receipts issued by the handler.
  • Directs the ODA Director to determine the validity of claims against the fund with the recommendation of the Commodity Advisory Commission rather than the approval of the Commission.
  • Revises the type of financial statements that must be submitted to the Director by an applicant for an agricultural commodity handler’s license or renewal.  The financial statements must consist of all financial statements and footnotes required by generally accepted accounting principles as promulgated by the Financial Accounting Standards Board together with an independent accountant’s report on the statements.
  • Establishes the total net worth requirements for a handler’s license applicant as 15 cents per bushel handled in the previous year and raises the minimum net worth requirement to $50,000.
  • Removes barley, oats, rye, grain sorghum, sunflower and speltz from the list of agricultural commodities addressed by the law.

Revisions to the law will be effective on October 11, 2013.    View the agricultural commodity handler’s legislation here.

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1 Comment

Filed under Business and Financial, Crop Issues

One response to “Ohio Legislature Revises Agricultural Commodity Handler’s Law

  1. Pingback: New Law will Resolve Court’s Disagreement over Priority to Failed Grain Handler Proceeds | Ohio Agricultural Law Blog

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