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PUC changes grain agreement rules

Posted: Wednesday, Jun 19th, 2013

Anderson Seed company as of Thursday, June 6. It is abandoned, the grass is growing over decorative rocks and no trespassing signs are posted. DEREK KEELING | REDFIELD PRESS

Before, it only required a handshake or verbal agreement. But now, after the Public Utility Commission (PUC) decided that a change in contractual agreements was needed, it requires an actual contract.

It started with the disintegration of Anderson Seed Company in Redfield. After Anderson Seed went belly up the company was unable to pay grain sellers the money that was due to them. Numerous farmers were left without a check, without their grain, and wondering what to do.

Anderson Seed had a surety bond for $100,000. A surety bond is a promise to pay a party a certain amount if the second party fails to meet some obligation, such as fulfilling the terms of a contract. That is exactly what happened to Anderson Seed. Their company went under and they were unable to pay grain sellers. The biggest issue with the surety bond was that $100,000 is barely a drop in the bucket when compared with the amount of money that was rightfully due to farmers.

Most of the $100,000 surety bond was paid to other entities before the actual grain sellers were paid. This prompted many sellers to take legal action. Farmers, like Ray Martinmaas, who lost $47,000 worth of sunflower seeds, applied for their portion of the surety bond but were denied for various reasons. Martinmaas is a sunflower farmer from near Orient. His application for a portion of the surety bond was rejected due to a voluntary credit agreement. After a court ruling, Martinmaas was granted his portion of the surety bond. This was because he did not have his signature on the voluntary credit agreement.

This is where the PUC stepped in and decided a change was needed. The new change came in the form of a rule. A rule that states that grain sellers will have to sign their contracts within 30 days.

The previous rule allowed farmers to call in and get a price quote, delay a payment, or get paid in the future. It essentially allowed farmers to call when it is convenient to them. The new rule would force farmers to sign the contract asap and not be able to phone in.

The South Dakota Feed and Grain association tried to ask the PUC to wave this rule, but the PUC denied the request. Even though the PUC denied the request, they still have plans to make a new rule process that will allow for verbal contracts, followed up by a mailed written contract. “We’re moving forward on this decision,” Chris Nelson, Vice chairman of the PUC, said.

South Dakota Farmers Union will host an informational meeting Monday, June 17, at Redfield to discuss grain buyer and grain warehouse laws in South Dakota and North Dakota. The meeting will begin at 1:00 pm at the Redfield American Legion Post Home, 612 N. Main Street, and is open to the public.

South Dakota Public Utilities Commission chairman Chris Nelson and representatives from both North Dakota and South Dakota’s grain buyer and grain warehouse regulatory staff will attend and give presentations on the state’s laws and rules regarding grain buying and warehousing and how the state’s regulations differ and where there is commonality.

Commissioner Chris Nelson plans to discuss recent legislation regarding grain buyer and warehouse legislation that passed the 2013 South Dakota Legislature. Jim Mehlhaff, the South Dakota Public Utilities Commission’s warehouse division director, will give a presentation about South Dakota’s licensing and inspection program. The laws were changed this year in response to the insolvency of Minnesota-based Anderson Seed Company’s facility in Redfield in February of 2012 where producers lost an estimated $2.6 million.

For the complete article see the 06-12-2013 issue.

Click here to purchase an electronic version of the 06-12-2013 paper.

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