Safety net for grain producers proposed following elevator fraud

A fraud case last year in which a former manager pocketed around $5.3 million from the Ashby Farmers Cooperative Elevator Co. left farmers in the lurch.

The perpetrator pled guilty last month to one count of mail fraud and one count of tax evasion.

It and other incidents left Rep. Paul Anderson (R-Starbuck) pondering ways to protect farmers in these fragile agricultural economic times.

Rep. Paul Anderson

Anderson offered what he views as a piece of the solution to the House Agriculture and Food Finance and Policy Division Thursday. A bill he sponsors, HF2021, was laid over for possible omnibus bill inclusion.

Inspired by legislation in South Dakota and other states, the bill, which has no Senate companion, would create a fund to indemnify grain credit contracts. The program would be funded initially through a one-time transfer of $2 million from the General Fund in Fiscal Year 2020.

Farmers would pay fees into the new fund of two-tenths of 1 percent on contracts held 60 days or less, and three-tenths of 1 percent for contracts held longer than 60 days. The fund would suspend collections upon reaching a $6 million cap and would not begin collecting funds again until it dips down to $3 million, Anderson explained.

With so many farmers under stress, indemnifying elevator failures was one way to help the state avoid losing more farms, Anderson said.

The Minnesota Farmers Union offered strong support for the bill.

“In the case of a fraud, there are things that will fall through the cracks,” said President Gary Wertish. “An audit will only detect 3 to 5 percent of fraud cases.”

Other groups were quick to express opposition.

“We believe to protect farmers it is more prudent to prevent a problem,” said Josie Lonetti, associate director of public policy at Minnesota Farm Bureau.

Laura Lemke, assistant director of the Minnesota Grain and Feed Association, went further, saying the proposal would encourage risky behavior.

Anderson also found concerns from members of his own party, with Rep. Tim Miller (R-Prinsburg) suggesting the appropriate route for protecting farmers in such a situation is “errors and omissions” insurance for board members and officers, not government funds.