You are headed to the bank, check in hand, ready to cash in on the grain you sold to your local elevator. However, once you arrive, you are told the check is not good. The funds are not there.

This was a reality for a handful of farmers in early 2020. It ultimately resulted in lost grain for more than 150 farmers who did business with Salamonie Mills grain elevator in northeastern Indiana.

“The day they locked Salamonie Mills’ doors, I was out $460,000, and several other farmers were out a lot more than that,” says Gary Kratzer, a farmer in Warren, Ind., who was affected by the elevator’s failure.

As scary as that situation was, they would at least have the Indiana Grain Indemnity Corp. to turn to in their time of need, right?

Just the start

The Indiana Grain Buyers and Warehouse Licensing Agency (IGBWLA) decided on using March 20, 2020, as the official failure date of Salamonie Mills. However, there was evidence that the elevator failed long before that date.

The failure date matters because it sets the trigger for the payment period to be fulfilled by the grain indemnity fund. Initially, farmers pay 0.2% of the value of each bushel of grain sold, and the money is pooled into the fund. You haven’t noticed that deduction recently because once the fund reaches a set limit, collections stop.

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Money from the fund is then paid out to farmers who have not yet been paid for delivered grain when a grain elevator shuts its doors. When an elevator fails, the payment period for lost grain spans 15 months back from the failure date.

Salamonie Mills’ failure date sparked controversy because there was evidence that the elevator’s owner had been in financial trouble since 2013. And the agency knew it, says Brianna Schroeder, an attorney and partner at Janzen Schroeder Ag Law.

“We started going over those financial documents and quickly realized, oh, my gosh, this isn’t just like the failure was a month or two ago,” Schroeder says. “This place should not have been licensed for the last eight years or so.”

New problem

This discovery of Salamonie Mills’ financial standing over the past decade raised this question: Why did the IGBWLA keep issuing a license if it knew the elevator was deep in debt?

Grain buyers are required to show a positive net worth to have their license reissued. Schroeder says Salamonie Mills had a negative net worth of $6.6 million at the end of 2018. With this evidence, there was proof showing that the elevator should have failed, or not had its license renewed, in December 2018. Specifically, Schroeder believed the failure date should be moved to Dec. 31, 2018.

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NEW DATE: Attorney Brianna Schroeder worked to reverse the initial ruling that solidified Salamonie Mills’ failure date as March 20, 2020. In April 2024, the Huntington County Circuit Court judge sided with the farmers, moving the failure date to Dec. 31, 2018.

After several years of litigation, the administrative law judge ruled against the farmers, upholding IGBWLA’s decision to use March 20, 2020, as the failure date. This date set a 15-month lookback period for grain reimbursement from the fund. Any grain delivered to Salamonie Mills before that period would not be covered.

The farmers appealed the administrative decision and on April 29, 2024, the Huntington County Circuit Court reversed the administrative order and held in favor of the farmers. The court ruled that the failure date should be changed to Dec. 31, 2018, which meant 445 additional days of grain deliveries would be eligible for reimbursement.

However, there still are questions swirling about IGBWLA. How could it let this slip through the cracks for so long?

Although Clark Smith, the new director of IGBWLA, could not answer that question directly since he was not with the agency at the time, he says that one of the biggest changes made since then is more manpower at the agency. Additionally, there is a more concerted effort for IGBWLA to be participants in Indiana’s grain industry, and to do more than checking boxes and signing off on licenses.

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“We haven’t changed a whole lot, but probably we’ve sharpened our focus,” Smith says. “I think a lot of times we walk into the business, we get the information we need, and we walk out.” Now, he shares that they are trying to be more intentional about having in-depth conversations with the licensees to create an open line of communication.

A long road

This Salamonie Mills case sparked an audit of the agency last year. While IGBWLA works to implement changes after the audit, litigation continues as farmers in the Salamonie Mills case work through agreements on payments from the grain indemnity fund.

All affected farmers will be made whole, except for those with delayed pricing grain. Payments of $4.627 million and $3.047 million have been approved to cover 80% of the funds lost. Those with open-storage grain and those who never appealed or appealed and settled will receive their remaining 20% when everyone has settled. Those with delayed pricing grain will only receive 80% of lost funds. However, the court ruling from April still echoes across the state. Some farmers wonder who the grain indemnity fund is there to protect.

The Huntington County Circuit Court judge’s decision in April states: “Using Dec. 31, 2018, as the failure date advances the legislative intent to protect farmers when a licensed grain buyer fails. Selecting the last possible date … as the agency did here, thwarts the purpose of the Indiana Grain Indemnity Program.”

So, what is the purpose of IGIC and the grain indemnity fund? What is the focus of the IGBWLA? The IGIC was created to protect farmers in the event of a licensed grain buyer’s financial failure. The IGBWLA was created to ensure financial integrity of the grain marketing infrastructure, while allowing the industry to be competitive, innovative and efficient, Smith says. However, if you ask the farmers involved, there is confusion surrounding the answers to those questions.

“This agency was founded to make sure the farmers got paid for their grain,” Kratzer says. “But as I read the new announcement, this agency is being turned into an agency to protect the grain purchaser, not the farmer.”

What Kratzer is referring to is a statement in the news release from the Indiana State Department of Agriculture that was sent out July 11, 2024, to announce that Smith would be the new director of IGBWLA. The statements says, “He will also serve as chairperson of the Indiana Grain Indemnity Corp. board of directors and work with local, state and federal agencies, as well as the private sector, to better understand the needs of Indiana’s grain purchasers.”

However, ISDA Director Don Lamb shares that IGBWLA’s focus has never wavered.

“The goal of the agency is the same today as it was when it started,” Lamb says. “That part has not shifted at all. And the goal of the agency is to protect farmers from a financial failure by ensuring all licensees have the necessary funds and financial security to conduct business.”

This article is the first in a three-part series of stories covering the litigation and outcome of Salamonie Mills’ failure.