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Crop sellers tuned in to rule-making

by Glen Chase | November 19, 2014 at 1:50 a.m.

Two new businesses with plans to help farmers get their crops to market are closely monitoring discussions between lawmakers, growers and others on the best way to regulate grain dealers in the aftermath of the Turner Grain bankruptcy.

Cal McCastlain, a Little Rock attorney, made a presentation to the state Agriculture Board at its Nov. 5 meeting about Southern Growers Marketing, Inc., which incorporated in March, months before Turner Grain's problems became public.

The other, Integrity Grain LLC of Moro, was formed in early fall to partly fill the void created by Turner Grain's absence, said Mark Waldrip, one of three principals in the company.

McCastlain, who described Southern Growers as a new farmer-owned cooperative, said the operation wasn't formed to take advantage of the Turner Grain situation.

"The credit is due to growers and the individual farmers" who have joined Southern Growers, McCastlain said Tuesday. "They understand the market. I think they saw some inefficiencies in it, or maybe a duplication of handling throughout the marketing chain. And they felt like with proper organization and also volume ... they could cut through some layers of that duplication or redundancy."

Southern Growers, which already has formed a board of directors, is currently seeking additional growers to become co-op members, he said.

Waldrip said he and two growers, Keith Freeland and Jeff Hill, became interested in marketing their own crops as well as those produced by other area farmers. So far, the company has loaded several barges and bought rice for use by mills, Waldrip said.

"Following the fallout from the Turner Grain collapse, we realized people are really uneasy and nervous about the companies in this business," Waldrip said. To try and reassure farmers, he said the new company met with bonding company representatives, which he said are more accustomed to working in states with established regulatory systems to direct the distribution of payments to farmers in the event of a collapse.

Integrity Grain ran into a bonding roadblock without such a system in place, he said.

"We, like everybody else, will be waiting for the regulations to come forward in the next six to nine months," he said.

Arkansas does not regulate grain dealers. On Nov. 5, Agriculture Secretary Butch Calhoun began circulating draft legislation that calls for anyone buying grain to be licensed in the state and that would require licensed dealers to meet minimum financial requirements, as well as carry insurance and be bonded. It would also create an voluntary indemnity fund to provide some coverage to growers if a licensed dealer fails.

Arkansas' grain dealers became the focus of the state's agriculture industry after Turner Grain Merchandising Inc. of Brinkley, doing business as Turner Grain Inc., filed for bankruptcy Oct. 23. The company was shut down in August after federal regulators found that grain elevators operated by the company were empty despite paperwork stating otherwise.

The Turner Grain situation has also resulted in several civil lawsuits in state and federal court against Turner Grain filed by growers and others trying to recover damages for losses totaling in the millions of dollars.

Terry Walker, assistant director of the State Plant Board, said Tuesday that the board is still collecting comments about the grain dealer licensing ahead of the upcoming legislative session in January.

So far, the draft is drawing a positive response, said Walker, who said it will likely be changed if it becomes state law.

"We're always taking comments and discussing and thinking about things that we may want to do. But we're leaving the draft as it is because it's what's out there."

Walker said that without licensing, there's no information available on how many grain dealers operate in Arkansas.

Walker said Plant Board Director Darryl Little has noted that the board has the authority to take control and operate grain warehouses, which are licensed by the state, in the event of failure. The draft grain dealer law would allow the board to audit dealers if they receive reports of a problem and then take steps to "moderate" it.

"In our rush to get a draft out, we didn't address that," Walker said, adding that he's unsure how it might eventually be addressed.

Walker also noted that people who buy and sell other crops could be required to get a state license.

"Right now, the draft is written to address grain. The question came up in our discussion, what about other agricultural products: cotton, peanuts, those kind of things?" he said. However, whether dealers who trade in other crops will be included is up in the air.

Both McCastlain and Waldrip said that given the size of grain markets in Arkansas, there is a need for some kind of dealer oversight.

Waldrip said requiring bonding and written contracts makes for good business.

"For clarity's sake, it's best to have written contracts for all the transactions. It just removes the questions many times that emerge down the road if the agreement is in writing," Waldrip said.

When the idea was last discussed by the Legislature in the early 1990s, McCastlain said, both the markets and those involved were different. Because so few people were involved, the issue was set aside, he added.

"And now you look up 20 years later and we're markedly different, both in scope and volume and what not, so it's time to clarify what the grounds are out there," McCastlain said.

Business on 11/19/2014

Print Headline: Crop sellers tuned in to rule-making


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