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Commissioner Quarles Addresses Updated Grain Insurance Fund in Open Letter

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In an open letter to Kentucky’s corn and small grain producers, Commissioner Ryan Quarles addressed the changes the General Assembly made to Kentucky’s grain laws concerning the grain insurance fund and how it affects them.

Text of the letter is below. You can view a PDF of the letter here.

June 3, 2019

Dear Corn and Small Grain Producers,

After a wet and sloppy 2018, I am optimistic about the 2019 season as farmers across Kentucky head into the fields. As the grain producers of our state, it is important you are aware of changes the General Assembly made to Kentucky’s grain laws concerning the grain insurance fund.

About a year ago, the Kentucky Department of Agriculture (KDA) began a working group to take a serious look at our grain laws, which hadn’t been updated comprehensively since the 1990s. That group consisted of a wide cross section of Kentucky agriculture and included representatives from the Kentucky Corn Growers Association, other grain industries, as well as Kentucky Farm Bureau. Together, those leaders developed policy recommendations that emerged as Senate Bill 153, a bill that passed this legislative session.

As you are aware, the main component of our grain laws concerns the Kentucky Grain Insurance Fund, a farmer-funded insurance program that compensates producers in the event a grain elevator fails. From the time this law was originally passed in 1984 to now, grain operations have grown from thousand-dollar businesses to multi-million dollar enterprises. Because of this growth, the previous Kentucky Grain Insurance Fund and licensing structure no longer met the needs of grain producers and businesses in 2019.

For instance, farmers who paid into the fund were eligible for coverage. But there was a snag: because the balance of the fund has exceeded $3 million since 1995, no assessment has been levied since that time, and no new farmers who entered the industry after that year paid into the fund. This meant farmers who began producing grain after 1995 were not eligible for compensation from the Kentucky Grain Insurance Fund in the event of a grain elevator failure. We rectified this by establishing a process by which all producers delivering grain in Kentucky are covered by the fund. Additionally, we expanded coverage by eliminating the $200,000 cap on per-farmer recovery of claims; you can now recover 90 percent of value sold. Those that hold warehouse receipts can still claim 100 percent.

However, producers are not required to participate in the Grain Insurance Fund. We are developing a clear annual procedure for farmers to opt out of assessments and choosing to decline coverage for that calendar year.

A few other items worth mentioning about the changes that may affect you:

  • Senate Bill 153 maintains a freeze on assessments until the fund falls below $3 million, at which point assessment will be collected until the fund reaches $10 million.

  • Senate Bill 153 defines “fund-covered grains” as those traded on public exchanges in the United States or Canada.

  • Senate Bill 153 made no changes to the existing license fee levels and contains no license fee increases.

  • Senate Bill 153 moves management of Kentucky Grain Insurance Fund to the State Board of Agriculture and expands that board’s representation to include key industry groups.

  • Senate Bill 153 eliminates 11 administrative regulations and streamlines KDA operations.

I strongly believe the new law puts our grain producers in a much more secure place than they were previously. I would like to express my deepest gratitude to the Kentucky Corn Growers Association, especially Ray Allan Mackey and Laura Knoth, for serving as part of the working group. Additionally, we thank the General Assembly and, in particular, Senate Agriculture Committee Chairman Paul Hornback for sponsoring the bill and House Agriculture Committee Chairman Richard Heath for working with Chairman Hornback and me to secure passage of SB 153.

I wish you the best of luck in the season ahead and hope that you have a prosperous and productive year out in the field. If you have questions for me or KDA, please do not hesitate to contact us.

Sincerely,

Ryan Quarles
Commissioner of Agriculture Commonwealth of Kentucky

PolicyJennifer Elwell