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Minnesota Establishes Grain Indemnity Program to Protect Farmers' Finances
Minnesota Ag Connection - 05/25/2023

Since 2015, Minnesota has experienced an average of one grain elevator failure per year, leaving farmers unpaid for the grain they have sold due to fraudulent activities or mismanagement. To address this issue, lawmakers have introduced a grain indemnity fund that would provide reimbursement for such losses.

State law currently mandates that grain buyers purchase surety bonds to cover their financial obligations. However, these bonds have proven to be inadequate, with farmers historically recouping only 11 percent of what they were owed in past failures. Recognizing the need for a more comprehensive solution, an advisory group formed in 2017 recommended the establishment of a dedicated fund to reimburse farmers.

The newly created grain indemnity program in Minnesota ensures that farmers will receive 100 percent reimbursement for cash sales they have made. For longer-term contract sales where payment is deferred, the reimbursement rate will be adjusted accordingly. This program aligns Minnesota with 14 other states that already employ similar funds to protect farmers from financial losses resulting from grain business failures.

To initiate the grain indemnity program, the state allocated a one-time infusion of $10 million in funds. In the future, if additional funding is required, farmers will contribute through a premium on the grain they sell. The agriculture commissioner will set the fee, which will not exceed 0.2 percent, equivalent to one cent per $5 bushel of grain. It is important to note that this fee will only be imposed if the fund balance falls below $8 million.

Overall, the establishment of Minnesota's grain indemnity program aims to protect farmers from financial losses caused by grain business failures. The program combines state funding with potential farmer contributions, providing a safety net while allowing individual farmers to decide their level of participation.

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