BOISE — A bill introduced in the Idaho Legislature would amend the state’s Seed Indemnity Fund law to require licensed seed warehouses to submit an audited financial statement each year and provide proof of a minimum net worth.
Warehouses currently have to provide an audited financial statement only during their initial license application.
The change was recommended by an Idaho State Department of Agriculture industry advisory committee. The department administers the fund, which is designed to protect producers in case of a warehouse failure.
The state’s seed and commodity indemnity funds were established following some high-profile financial failures by warehouses in Idaho.
“We just want to ensure the auditors have the ability to make sure there won’t be another failure,” said advisory committee chairman Richard Durrant. “We’re trying to protect the producers.”
The Idaho-Eastern Oregon Seed Association has concerns about the legislation, and Food Producers of Idaho members last week held off taking a position on the bill until they receive input from IEOSA.
Sen. Jim Rice, R-Caldwell, who introduced Senate Bill 1207, said IEOSA’s concerns center on requiring an annual audited financial statement, and there has been talk about splitting the bill.
“If the bill moves forward, it’s going to be amended,” said Rice, chairman of the Senate Agricultural Affairs Committee, where the bill was sent.
Producers who deliver seed to a licensed warehouse pay a small assessment to help finance the fund. In the event of a warehouse failure, the fund covers 90 percent of a grower’s loss.
Durrant, a warehouse owner, said an audited financial statement costs about $2,000 to $5,000 and requiring warehouses to present one annually is not too much to ask to ensure the state’s seed producers are protected.
The bill also sets out specific criteria that would allow the ISDA director to deny the issuance or renewal of a license to a warehouse following a public hearing.
Those criteria include the applicant having failed to make previous claimants whole due to a previous failure, the applicant misrepresenting material facts in the application or producers required to pay into the fund presenting relevant objections.
ISDA Director Celia Gould told FPI members the department is comfortable with the way the bill is written.
“We put a lot of value in what our industry advisory committees say,” she said. “I look to them as kind of being my boss on these ... issues.”
The seed fund balance is currently $8 million, while the commodity fund balance is $13 million. The state’s commodity fund statute already requires warehouses to provide an audited financial statement annually.
The funds’ balances ensure farmers can be reimbursed quickly in the event of a warehouse failure, said former House Agricultural Affairs Committee Chairman Doug Jones, the author of both funds’ statutes.
The seed fund’s advisory committee, which has seven producers and two industry members, was intentionally weighted in favor of growers because it was created to protect them, he said.
If the advisory board feels the changes are needed, “Then I think it’s important for agriculture to make this change that has been recommended,” Jones told FPI members.