Every year Texas grain producers entrust their livelihoods with the grain buyers and grain warehouses they do business with. When producers deliver their crops to grain elevators, they expect those companies to fulfill their contractual obligation to remit timely payments or adequately maintain the grain in storage.
In light of a number of grain facility closures in recent years, plus the recent news that the Bardwell Grain Company in Bardwell, Texas, was closed, this is a significant issue for Texas grain producers.
That is why Texas Representative Larry Phillips filed House Bill 1840 to give producers the opportunity for financial protection in these situations. H.B. 1840 will establish legislation that will let producers vote to enact a grain indemnity fund to protect the financial interests in the event an elevator or other grain buyer is not able to meet its financial obligation to the producer.
“This bill essentially establishes the opportunity for Texas grain producers to create a producer-funded insurance program,” said David Gibson, executive vice president for the Corn Producers Association of Texas. “Texas is far behind many grain-producing states in creating such a fund, and it’s important that our state’s producers have this protection.”
Upon passage of the Bill, a grain producer referendum will be held to begin collection of assessments. Producers will vote by a simple majority to pass the referendum and enact the Fund.
The Texas House Committee on Agriculture will hold a hearing on H.B. 1840 on March 29 at 8 a.m. in the Capitol Annex, room E1.014.
“We encourage producers to attend this hearing to express their support of House Bill 1840 and give them an opportunity to enact the Fund to protect producers across the state from purchaser failures,” Gibson said. “Additionally, they should visit with their grain elevator or grain buyer about current practices, so producers may be fully informed before entering into a contract or delivering grain for storage.”
Currently, grain producers only have the Texas Grain Warehouse Act or the Federal Grain Warehouse Act to protect them, but those laws only protect grain producers have stored in a facility. Texas Senate Bill 248 and House Bills 1324 and 1361 were recently filed to further strengthen the Texas Grain Warehouse Act based on recommendations of the recent TDA Grain Warehouse Task Force. These Bills will require the bond of 6 cents per bushel to be increased to 10 cents per bushel and the maximum bond requirement for a warehouse will be $500,000.
While these enhancements to the Texas Grain Warehouse Act are a step in the right direction, producers have found these stipulations often do not cover the financial catastrophe caused by a grain facility closure.
For instance, many producers are only receiving 50 cents for every dollar worth of grain they had in the Dorchester grain facility that was closed recently. These losses affect not only the producer, but also lenders and businesses. The economic impact of a failed elevator or other grain purchaser ripples across communities, and even across the state.
With a grain indemnity fund in place, producers would not see near this significant a financial loss, Gibson said.
The Fund would be regulated by a seven-person producer board, appointed by state commodity groups, in conjunction with the TDA. While it may require TDA to assign personnel to handle the assessments, the costs to TDA will be fully paid for from the proceeds of the Fund. Thus, no tax dollars will be used for administration, enforcement or for indemnities to producers.
“House Bill 1840 would give grain producers the opportunity to decide if they want a statewide grain indemnity fund – an opportunity they do not have without this legislation,” Gibson said.
For more information about H.B. 1840 and the grain indemnity fund, visit the Legislature page on the CPAT website, www.TexasCorn.org.