During the past couple of months, there have been some developments pertaining to Wisconsin’s Agricultural Producer Security Program.

A few months ago, the Wisconsin Dept. of Agriculture, Trade & Consumer Protection (DATCP) held public hearings on proposed changes to the producer security program. This program helps protect producers against financial defaults by grain dealers, vegetable contractors and milk contractors. Most contractors (“contributing contractors”) must pay fund assessments to finance an agricultural producer security fund. The fund is held in trust, for the benefit of agricultural producers. If a contractor defaults on payments to producers, DATCP may reimburse producers from the fund. Fund assessments are like insurance premiums, and are based on contractor size, financial condition and risk practices.

Prior to 2003, DATCP administrative costs were paid by a combination of general tax revenue (“GPR”) and contractor license fees. However, the 2003-2004 Biennial Budget Act eliminated virtually all GPR funding for program administration. That made it necessary to transfer staff from GPR funding to license fee funding. Partly as a result of that change, current license fee funding is no longer adequate to cover administrative costs. Deficits in the grain and vegetable administration accounts are currently being covered by milk contractor license fee revenues and by fund assessment revenues that would normally go to the producer security fund (for the benefit of producers).

The public hearings, which were held in early Fall, heard testimony pertaining to DATCP’s proposal to address these funding problems. Specifically, DATCP proposed changing fund assessments for gain dealers and grain warehouse keepers, and changing required minimum fund assessments for grain dealers, grain warehouse keepers, milk contractors and vegetable contractors. According to DATCP, the total of all license fees and fund assessments paid by contractors under the producer security program will actually decline over the next few years, because of fee credits and declining formula rates that are built into the producer security law itself.

However, at the hearings, no major agriculture organization supported the proposed changes. In fact, most of the organizations expressed their dissatisfaction with the entire producer security program.

As a result of these hearings, DATCP created a working group of industry representatives to review the entire program and suggest possible changes to it. This group met in October, November and December and continues to be engaged in a comprehensive review of the program.

At one of the recent meetings, an insurance representative told the group that, unlike past years, it is now possible to obtain trade credit insurance ranging from $5-25 million per occurrence. The representative proposed that coverage could be set at $5 million per incident at an annual cost of $58,750 (with a 10% deductible). Since the current producer security fund of $8 million generates almost $400,000 in interest each year, the cost of trade credit insurance could be covered by current interest monies.

The DATCP working group will continue meeting for the next few months and explore all funding alternatives prior to releasing a final report.