More than $7.5 million from the grain indemnity fund will be returned to farmers after settlements from the Salamonie Mills grain elevator failure, with more payments to follow.

The fund, housed within the Indiana Grain Indemnity Corp., is in place to protect farmers should a grain elevator fail, still owing farmers for grain it doesn’t have. That mission was put to the test when Salamonie Mills folded in March 2020.

The elevator’s failure sparked controversy because there was evidence showing the elevator had been in financial trouble as early as 2013, even though March 20, 2020, was chosen as the official failure date by the Indiana Grain Buyers and Warehouse Licensing Agency (IGBWLA). That failure date sets the payback period from the fund, which spans 15 months back from the failure date.

If March 20, 2020, was left as the failure date, many farmers would have faced lost income. That is because a number of farmers placed grain on delayed pricing or storage in the elevator for more than 15 months before March 20, 2020.

After several years of litigation, the farmers involved in the lawsuit reached a resolution with the IGBWLA after the Huntington County Circuit Court ordered that the proper failure date was Dec. 31, 2018. Those affected by Salamonie Mills’ closure initially will be paid 80% of what they lost. This is in the form of approved payments of $4.627 million and $3.047 million, totaling more than $7.5 million. Once all settlements are complete, those with open storage grain and those who never appealed or appealed and settled will be paid their remaining 20%. Those with delayed pricing grain will not receive that additional 20%.

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Taking a hit

After the eligible farmers receive that remaining 20%, close to $10 million from the grain indemnity fund will have been used to reimburse farmers affected by the Salamonie Mills failure. The fund currently sits at $31 million, IGBWLA Director Clark Smith says.

The payments will not cause the fund to dip below the $20 million trigger for a collections period. If the fund falls below that number, then a collections period may begin until the fund hits $25 million. The fund was at $33.7 million as of June 30, which was the date used to determine if the fund hit the trigger amount for this year. Smith says that farmers should not worry about having to pay into the fund, at least for the next year.

“If the fund falls below $25 million by a certain date, it has to be voted on,” Smith says. “And so, the Indiana Grain Indemnity Corp. board of directors voted in our July 18 meeting that there would not be a collection period over the next 12 months.”

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The board will vote on the matter again next year. If IGIC were to ever vote to open a collections period, that information would be widespread, Smith says.

“Those decisions are very open and transparent to the public,” Smith says. “We’re never going to surprise anyone with a collection period.” There have only been two collection periods since the fund’s creation: one from 1996-98 and one from 2015-17. If a collection period is opened, farmers will pay 0.2% of each bushel of grain toward the fund. However, they have the option to opt out of the fund, thus forfeiting any protection by the fund.

For the farmers

The IGBWLA’s initial decision to use the last possible date as the failure date for Salamonie Mills raised this question: Who is the fund there to protect? Selecting the last possible date would leave some farmers out of the 15-month payment period, causing them to lose money on that grain that had been delivered without payment. Brianna Schroeder, an attorney and partner at Janzen Schroeder Ag Law, questioned why there was any resistance at all to reevaluate that failure date.

“Why are we fighting, inch by inch, resisting any payment to these farmers?” Schroeder says. “It doesn’t make a lot of sense to me.” She felt that there was a focus on protecting the fund rather than protecting the farmers.

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“Our concern was always that there was this weird focus on the fund itself,” Schroeder says. “Others kept saying: ‘What’s going to be the hit to the fund? How’s the fund going to manage this? What’s going to happen to the fund?’

“We kept saying, ‘Wait, look at the language in the statute.’ The whole reason this all exists isn’t for the fund. It’s for the farmers.”

Smith echoes the sentiment that the fund is for the farmers, noting that the goal is the same.

“The goals of that fund have not changed,” Clark says. “They’re very similar across the U.S. Every state has a different number in that fund based on statute. But in the lifetime and existence of the fund in Indiana, there are no changes in the purpose or definitions of it as it was set forth in statute.”

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