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Grain dealer oversight moves into Arkansas legislative spotlight

Grain dealer oversight moves into Arkansas legislative spotlight
Arkansas moves to close gaps in grain business oversight.

As planters move across Mid-South fields, a host of legislative issues – both state and federal --  are being tackled by lawmakers. Since those issues will impact agriculture, those at the helm of the Agriculture Council of Arkansas are paying close attention.

In late March, Andrew Grobmyer, executive vice president of the council, spoke with Delta Farm Press about how the new laws and regulations are being received. He also spoke on the fallout and legislative action in the wake of the demise of Turner Grain.

Last summer, Brinkley, Ark.-based Turner Grain set alarm bells ringing after bouncing checks and failing to pay farmers for grain. The failure of Turner Grain, now in bankruptcy proceedings and on the hook for tens of millions of dollars, was the impetus behind a law just passed by the Arkansas legislature.

“SB555, the Arkansas Grain Dealers Act of 2015, became law when Gov. Hutchinson signed it,” says Grobmyer. “The Ag Council, Farm Bureau and others supported that bill. It was crafted by the chairman and vice-chairman of the Senate and House agriculture committees in the legislature.

“It was designed as a response to what has happened with the failure of Turner Grain. It’s a first step in addressing the situation – at least the things we currently know about what happened. There remain a lot of unknowns, of course, but given what is known this was what was struck upon by lawmakers and ag industry leaders.

Arkansas governor signs Grain Dealer Act to regulate brokers

“The bill will provide the Arkansas State Plant Board more authorities and oversight of state grain dealers. There was kind of a regulatory void when it came to that segment of the commodity marketing industry. The bill provides some pretty common sense rules and regulations in a way that isn’t overly burdensome or too cumbersome. It’ll provide some assurances and certainty for grain sellers.

“The first thing it does is simply allow us to know who is involved in the business. Licensing and registering will be required and the businesses will be listed on the Plant Board website. To be licensed, they’ll have to show they have sufficient levels of credit worthiness. The Plant Board will go through a regulatory rule-making process that will include public comment before they finalize all that.

“Maintaining proper records is also a huge part of the bill. Record-keeping is incredibly important for grain marketers and if they won’t keep good records they probably shouldn’t be in business. Regardless, the Plant Board now has the authority to do audits and conduct periodic reviews of the businesses. They also have the authority to suspend or revoke licenses and terminate operations in the event serious problems are discovered.

“A hotline will also be set up to help sellers report any late payments. Such late payments will throw up red flags that could indicate a potential problem.  We learned that from the Turner Grain case.

“A second bill (SB920) aimed at preventing another Turner Grain fiasco was also introduced in the state Senate. It wasn’t broadly supported by the ag industry. It contained a component that would establish an indemnity program. To do so, it would have taken some of the funds designated for research and promotion of crops – check-off dollars.

“There was a lot of hesitancy to reach into the pool of check-off money for that. That isn’t to say that an indemnity fund might not be set up in the future. It isn’t off the table. I think there will continue to be discussions about that and see if it’s a viable option and how it might be structured. Other states do it but it would be difficult to set up a fund that would cover the losses of the magnitude that seems to have been experienced by sellers to Turner Grain.

“Honestly, depending on what information comes out of the court case and bankruptcy proceedings, there may be several phases of legislation that plug holes exposed by Turner.”

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