Grain Elevators

One doesn’t have to travel very far in rural South Dakota during the month of July to find the countryside abuzz with combines, grain carts, and trucks bringing in the wheat harvest. In fact South Dakota ranks sixth for wheat production in the United States.

What does the wheat harvest have to do with the Public Utilities Commission? Plenty! One of the commission’s responsibilities is licensing grain buyers and grain warehouses in the state. The whole purpose of that responsibility is to ensure that the farmers who produce the wheat and other grains get paid when the grain is sold to an elevator or other grain buyer in South Dakota.

Our state law requires these grain buyers to annually renew their license to buy grain. A key part of that license renewal is a requirement that the grain buyer submit financial statements to the PUC with their license application. PUC staff scrutinizes the finances of the grain buyer to ensure that the buyer meets certain financial minimums for operation. State law also requires the buyer to post a bond the size of which is based on the amount of grain being purchased in a year.

In addition to these annual license and bond reviews, the PUC employees inspectors who make periodic unannounced inspections of grain buyers to do on-site examination of financial, contract, and inventory records. A key financial metric for grain buyers is to maintain adequate working capital so that cash is available to pay farmers for their grain on a timely basis.

State law allows farmers to demand immediate payment for their sold grain. However, farmers may choose to enter into a contract to defer their payment for sold grain or defer the pricing of the grain to a later time. All of these arrangements are spot checked by PUC inspectors to make sure the grain buyer is in a position to make payment.

Does all of this effort by PUC mean that no grain buyer will ever default on a payment? No. In 2011 a buyer in Redfield defaulted on the purchase of sunflowers. In the wake of that failure, I led an effort working with PUC staff and the state legislature to change state law to provide the PUC with better legal tools to find grain buyers who may have financial difficulties before those problems lead to grain payment defaults.

These new tools combined with diligent inspection by the PUC staff seem to be working. No grain payments have defaulted. Farmers have been paid in full. We will continue to work hard to protect grain payments for our South Dakota agricultural producers.