Background Information
Agricultural Producer Security (APS) has been a long established program at the Wisconsin Department of Agriculture, Trade and Consumer Protection. The purpose of APS is to protect producers from financial default by those purchasing the producers’ products. WFBF has had long standing policy in support of the program.
The current APS program covers dairy, grain and vegetables, except potatoes for chipping. Fruit once was covered by the program, but that was changed in the 1990s when both growers and processors supported legislation to remove fruit from the program. Livestock is not included in the state’s program because of the federal Packers and Stockyards Act. Federally licensed grain warehouses are also exempt from the program.
Under the program, purchasers of farm commodities must be licensed and subject to financial review by DATCP auditors. Determined by the financial condition of the company, DATCP imposes a fee based on the amount of product purchased from farmers to be paid annually to the producer security fund. Fees from all three industries are deposited into the same fund, but separate accounting is maintained. Currently there is over $13 million in the fund, with an overwhelming majority of it coming from the dairy industry.
If a processor was to default, DATCP would make payment to the farmers and then utilize the court system to recoup as much as possible from the defaulting processors. If claims are larger than the funds ability to pay, claims would be prorated.
Over the last ten years, one small dairy plant has defaulted. There has been increasing discussion between farmers and processors about the program. Some want to see it continue; others are questioning whether it should. Those that suggest the program should be eliminated cite risk management and financial tools available to farmers today that were not available a few years ago. Those that suggest the program should continue cite the consolidation of agribusinesses as a reason why DATCP needs to maintain the program in order to protect farmers during turbulent economic times.
Current WFBF Policy
“We support a state's indemnity fund law that will enhance a producer’s ability to recover losses due to the financial failure of a handler or processor; however we believe the following changes need to be made to the program.
- Cap the level of the fund and keep dairy, grain and vegetable accounts separate. This keeps one industry from subsidizing a failure in another.
- Limit the purpose of Agriculture Producer Security fund to defaults due to business failure.
- Allow all contractors who meet or exceed certain financial criteria to be exempt from the indemnity fund assessments.
- Allow processors to post private security instead of participating in the program.
- Cap assessment rates for each milk contractor at a rate determined by a simple average of the assessment rates over a three year moving average of program participation. This would stop milk buyers from being “punished” for revolving equity or expanding their business.
- Require financial statements ordinarily used by the processor. Eliminate Department of Agriculture, Trade, and Consumer Protection staff review of financial statements to save staff expenses.
- Exempt producers that retain title to their commodities throughout the processing and sale of the finished products.
- Interest from funds should go toward program costs to reduce fees.
- Require Department of Agriculture, Trade, and Consumer Protection to substantially reduce administrative costs.”
Considerations
- Should existing WFBF policy be maintained?
- Should the producer security program be eliminated? If so, what should be done with the $13 million in the fund?
- Does the program need to be modified? If so, how?
- Should cooperatives be exempt from the fund?
- Should the program be left as is?
