With 2 billion bushels of corn and 450 million bushels of beans produced on average each year in Illinois, the state’s farmers have their financial livelihood tied up not just in the production of grain but in the merchandising of it as well. To protect their investment, the Illinois Department of Agriculture established the Illinois Grain Insurance Fund.
The purpose of the fund is to provide a guarantee for producers that they will be compensated for grain sold to or stored with state-licensed grain dealers or warehousemen even if that licensee becomes insolvent. “Basically, it’s a safety net for farmers’ paychecks,” says Stuart Selinger, chief of the bureau of warehouses.
Here’s how it works: All state-licensed grain dealers, warehousemen and sellers, as well as those banks that lend to them, pay assessments to the fund to ensure its funding to at least $6 million. If an insolvency occurs and a farmer’s grain is in storage at the failed facility, the fund will be used to reimburse them for 100 percent of what they’re due at the market price on the day of the insolvency.
There is a sliding scale of payment percentages and limits for other circumstances, but the goal in all cases, Selinger says, is to “protect the financial interests of the state’s grain producers and the communities where they reside. There would be a tremendous trickle-down effect in the local economies if producers were not guaranteed their income.”
Selinger adds that the fund offers reassurance for lending institutions as well, since grain receipts issued by grain warehousemen are often used by banks as collateral so licensees and producers can borrow money to operate their businesses.
“Banks have a higher confidence level knowing there is an insurance fund, Selinger says. “It increases their willingness to lend to the industry.”