IN THE NEWS
Update from the National Grain and Feed Association
May 1, 2019
In Iowa, there is a legal battle brewing over a warehouse operator’s ability to deduct storage and conditioning expenses from grain settlement, a common business practice applied across the U.S. grain industry. The battle is in response to a bank attempting to coerce grain warehouse operators to refund storage and conditioning expenses after a borrower was unable repay bank loans. The Iowa Legislature has bill language to codify the common business practice of deducting storage and conditioning expenses from grain settlements. The grain warehouse lien language as introduced is below:
Grain Warehouse Lien Language
Notwithstanding any provision in this section to the contrary, a warehouse’s lien created in subsection 1, that is in favor of a warehouse operator licensed under either chapter 203C or the United States Warehouse Act, 7 U.S.C. ch. 10, is effective against all persons and is superior against all other competing security interests and agricultural liens. This division of this Act, being deemed of immediate importance, takes effect upon enactment.
The proposed grain warehouse lien language does not go beyond current business practices and would only apply to a commodity held by the warehouse for the commodity owner. Codification of this normal business practice is needed in part because grain warehouse operators cannot mitigate the financial risk of their customers. Public grain warehouses must accept, so far as the capacity of the grain warehouse will permit, all sound grain in warehouseable condition without discrimination against any person tendering the grain.
The proposed legislation to codify the normal business practice has many supporters and the Iowa agricultural associations (grain industry and producers) have a great ground game in place to help gain support for its enactment, but there is opposition from a portion of the banking community. If you have operations in Iowa that would be impacted if storage and conditioning expenses were compromised, please reach out to your Iowa associations to find out how you can best make known your support for the grain warehouse lien language.