PUC Commissioners Guest Column:
New protections for farmers selling grain

March 11, 2013
By: South Dakota Public Utilities Commissioners Chris Nelson, Gary Hanson and Kristie Fiegen

Throughout 2012, the South Dakota Public Utilities Commission worked with producer and grain buyer groups to develop legislation providing the PUC better tools for evaluating the financial soundness of grain buyers and warehouses in the state. That effort became HB1017 which received great bipartisan support in the legislature, has been signed into law by Gov. Dennis Daugaard, and becomes effective April 1, 2013.

The legislation contains several provisions that strengthen the PUC's oversight of grain buyers and warehouses. Those provisions include:

1. Requirements to provide the PUC with current financial information under penalty of perjury
2. Providing the PUC quick access to financial information that is located out of state
3. Requirements for grain buyers and warehouses who fall out of financial compliance to report immediately to the PUC or face criminal penalties
4. Specifying that the PUC must be allowed to conduct inspections of records and facilities; denial of access may result in license suspension
5. Adjusting bond requirements with increases for some grain buyers

There are several important provisions in law that producers need to know as they market grain. If grain is delivered as a cash sale, the producer has the right to payment on demand. Depending on the location of the bookkeeping department, requests for payment should be satisfied within 48 hours of dumping the grain. All cash grain sales must be paid no later than 30 days after dumping. If, for any reason, a producer is not able to obtain their payment within these timeframes, the problem should be reported to the PUC's grain warehouse division by calling 605-773-5280. 

Should a grain buyer insolvency occur, bond proceeds may be available to cover a portion of any losses by producers who have made cash sales. By law, bond proceeds do not cover voluntary credit sales such as delayed pricing or delayed payment contracts. 

Because most grain contracting for delivery or payment occurs over the telephone, the legislature several years ago made specific provisions for these types of oral contracts for the sale of grain. It is important to understand that any oral contract between a producer and grain buyer must be followed by sending the producer a written contract. If the producer disputes the contract terms, that dispute must be made in writing within two days of receiving the written contract.

If you have further questions regarding the protections provided in our state's grain buyer and warehouse laws, please contact the PUC at 605-773-5280 or puc@state.sd.us.