Protecting Grain Producers

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In 1882, the Territorial Legislature created an ad hoc committee to deal with rail issues, based on complaints from residents of Dakota Territory. Three years later, the Legislature established the Board of Railroad Commissioners. A few months after South Dakota gained statehood, the Legislature of 1890 assigned regulation of grain warehouses to the Board of Railroad Commissioners since most grain facilities were adjacent to railroads. Additional responsibilities were added to the Board of Railroad Commissioners over time, and in 1939 the Legislature changed its name to the Public Utilities Commission (PUC).

Today the PUC still regulates public grain warehouses and grain buyers (among other responsibilities), to make sure that these businesses are financially able to meet their obligations to grain farmers. In an effort to be vigilant in protecting the integrity of grain trade for producers, leaders in the industry met with the PUC this past summer to analyze current laws regarding grain buyers – those who buy grain to resell, and public grain warehouses – businesses who store grain on behalf of producers. There was also discussion about the role of grain brokers who negotiate transactions between producers and grain buyers but do not take title to the grain. There was no desire to expand the size of government or add new regulations; however, there was a desire to ensure our laws provide adequate protections for transactions that can run into hundreds-of-thousands of dollars

The Senate has given unanimous approval to three bills introduced at the request of the PUC. SB35 would increase the maximum penalties for buying grain or operating a public grain warehouse without a license. Current penalties are capped at $20,000, which for some is not an adequate deterrent. This bill proposes to increase the maximum fine to $50,000, although the PUC would have the ability to set a lower fine. For comparison, the State of Nebraska is considering a fine of $870,000 for similar violations. SB38 makes it a Class 5 felony for a grain broker to negotiate a transaction with an unlicensed buyer. SB39 helps farmers get paid faster when a claim is made on a grain buyer bond. Currently the law allows six months for claims to be filed, which means the PUC cannot distribute bond proceeds until that time has passed. This bill would allow grain producers to get paid after ninety days.

A fourth bill, HB 1037, was brought in by the Attorney General’s Office to revise the penalty for willful violations by grain buyers and grain warehouse operators. If passed, the amount of penalty would be tied to the value of the theft.

I appreciate the work of the PUC and the Attorney General’s Office to listen to the concerns of industry and develop these proposals to enhance grain regulation and enforcement.

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