Bill Would License, Regulate Grain Dealers In Response To Turner Grain Crisis

Feb 25, 2015

A bill was filed Wednesday that would let the State Plant Board require grain dealers to post surety bonds, obtain a license, and temporarily rescind that license without a hearing.

Senate Bill 555, the Arkansas Grain Dealers Act, is a reaction to the loss by Arkansas farmers of millions of dollars unpaid by Brinkley-based dealer Turner Grain Merchandizing. Butch Calhoun, Arkansas’ secretary of agriculture, in October estimated total producer losses at $50 million.

Sponsors of the bill are Sens. Ronald Caldwell, R-Wynne, and Bruce Maloch, D-Magnolia, and Reps. Michael John Gray, D-Augusta; R-Dan Douglas, R-Bentonville; and David Hillman, D-Almyra.

The bill will be the comprehensive legislative response this session, Hillman said. It would require grain dealers to be licensed annually by the State Plant Board. Dealers that operate without a license would be committing a Class D felony.

The bill would allow the State Plant Board to require dealers to post a surety bond based on the volume and size of their operation. Licenses could temporarily be suspended without a hearing if the Plant Board believes that action is warranted. The hearing must be held within 10 days of the suspension.

The Plant Board would have the ability to petition a court to appoint a receiver to take custody of the dealer’s assets – a provision Hillman said would “probably not” have much ability to help growers who suffer losses.

"In a case like that, the growers, the farmers are always going to be the ones to lose, because by the time that all that happens, there are no assets to seize, except maybe a cell phone and an office chair and a desk and things like that," he said. "But at least we felt like we needed some teeth in it, and that’s about the biggest thing that we’ve got in there as far as punitive things."

Dealers would be required to file an annual report with the State Plant Board, which would be empowered to audit and inspect the dealer. The Plant Board would create a publicly accessible database of dealers and persons licensed under the United States Warehouse Act and the Arkansas Public Grain Warehouse Law.

The law would require the Plant Board to establish a hotline for customers to notify the board when a dealer is more than 30 days late with a payment. Dealers would be required to notify customers of the existence of the hotline. Hillman said the hotline hopefully would help the Plant Board contain the damage before more farmers are harmed.

Hillman said the legislation was crafted by legislators along with Arkansas Farm Bureau, Riceland, the Agricultural Council of Arkansas and Ben Noble of the lobbying firm Noble Strategies. The State Plant Board was involved in one meeting and provided input. It wanted more legislative direction, but legislators wanted a simple, flexible bill.

The creation of an indemnity fund into which growers and dealers would pay was discussed and dropped, Hillman said. A mandatory fund drew opposition from those who felt they were being penalized for the actions of wrongdoers. A voluntary fund was considered, but lawmakers decided nonpayers would expect compensation despite not contributing to the fund.

"We felt like that would place an undue burden on honest farmers and honest grain dealers, and would probably not help in the long run,” he said. “The bureaucracy of it was just, every time you solved one problem, you created two more."