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Candidate wants to strenghten state's grain elevator insurance

BISMARCK (AP) -- North Dakota's Democratic candidate for the state Public Service Commission said Thursday the Legislature should strengthen a $6.9 million insurance fund that compensates farmers if a grain elevator goes broke.

BISMARCK (AP) -- North Dakota's Democratic candidate for the state Public Service Commission said Thursday the Legislature should strengthen a $6.9 million insurance fund that compensates farmers if a grain elevator goes broke.

Recent data shows that the fund could be overwhelmed by a single large elevator failure, said Brad Crabtree, who held a news conference in Fargo to discuss the issue.

"When the PSC's own numbers show extraordinary levels of liability, and we know commodity markets are already highly volatile, the conclusion is pretty obvious that we need to have a larger fund," Crabtree said in an interview.

Incumbent Republican Public Service Commissioner Kevin Cramer, whom Crabtree is opposing in his bid for re-election, said lawmakers and representatives of farm and commodity groups recently had examined the issue and concluded the fund's present balance was sufficient.

"Farmers already know how to manage their own risks," Cramer said.

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The 2003 Legislature established the fund to protect farmers who sell their grain to elevators on credit, which means they delay taking payment for their crop for at least 30 days. Credit sale contracts allow farmers to defer taking income for tax reasons.

The fund was initially financed by an assessment against credit sales of grain that equaled $2 for every $1,000 worth of grain sold.

At the start, lawmakers specified the fund should collect assessments until the fund had $10 million in assets. The cap was lowered to $6 million three years ago, and the assessment was lifted in July 2008 when the benchmark was reached. Since then, investments have built the fund's balance to almost $6.9 million.

The fund has had one set of claims, for $110,314, resulting from the March 2007 failure of a grain elevator in Rhame in southwestern North Dakota. Farmers affected by an elevator bankruptcy may recoup only 80 percent of their losses from the fund, with an individual limit of $280,000.

Crabtree said Thursday the cap should be at least $10 million. Recent PSC data showed that at least 10 North Dakota grain elevators had $10 million or more of credit-sale liabilities on their books, he said.

"The first priority is to start building up that fund again," Crabtree said. "We ought to allow that fund to accumulate to the point where it's covering real liabilities, and so we don't get ourselves in a situation where in order to protect farmers, we force taxpayers to bail out the system."

Cramer said farmers should be allowed to keep their own money for risk management, rather than paying it to the Public Service Commission.

"Farmers, by and large, lobbied the Legislature to lower the cap from $10 million because they were tired of paying into a fund that they felt like was protecting someone other than them," Cramer said.

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Steve Strege, director of the North Dakota Grain Dealers Association, which represents grain elevators, said the group had no position on what the fund's cap should be.

Farmers have two principal types of insurance protection when selling grain to a licensed elevator. One is the credit-sale indemnity fund, as it is officially known, which covers grain sales when the farmer delays taking payment for at least 30 days.

The second is the elevator's bond insurance, which varies in size according to how much grain the facility can store. An elevator's bond does not cover credit sales.

When an elevator goes broke, the Public Service Commission typically takes control of its assets, gathers claims from farmers who are owed money for their grain, judges whether they are valid and decides how much they are to be paid.

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