Under this emergency rule, the fund balance amount attributable to vegetable contractor will begin to build towards the required statutory minimum of $800,000.
Minimum Statutory Balance
Actual Balance as of June 30, 2017
Maximum Statutory Balance
Grain Warehouse Keepers
This emergency rule will have a positive impact on grain dealers by automatically reducing assessments whenever the grain dealer portion of the Fund balance exceeds its statutory maximum. The rule also reduces deferred payment contract assessments whenever the grain dealer portion of the Fund balance exceeds its statutory maximum.
This emergency rule will have a positive impact on milk contractors by reducing their assessments by 20 percent. The Fund will continue to grow but at a slower pace thus ensuring that they pay a fairer share of the cost of the program.
This emergency rule will increase vegetable contractor fund assessments by 0.2% of their contract obligations to producers. By spreading the increase to achieve the statutory minimum over 18 years, this should have minimal impacts on the vegetable contractors.
Federal and Surrounding State Programs
ATCP 99 - Grain
The United States Warehouse Act is a voluntary regulatory program administered by Farm Service Agency (FSA), a unit within USDA. Under the Act, warehouse keepers who obtain a warehouse license must comply with several FSA regulations. Generally, the warehouse keeper must maintain enough grain in inventory to cover 100% of depositor obligations at all times. Further, FSA licensed warehouse keepers must submit financial statements, submit to inspections by USDA auditors, and post surety bonds. In the event a warehouse defaults, FSA can convert the bonds to cash and disperse the proceeds to depositors. The federal grain warehouse license is officially a voluntary program; in practice, it is not completely voluntary. Every state that has significant grain production (including Wisconsin) has some type of state grain warehousing law. These laws require grain warehouse keepers to obtain a license but allow them to choose either a state license or a federal license. Those that choose a federal license are exempt from the state licensing program.
ATCP 100 - Milk
No federal programs currently exist that offer milk producer security from contractor payment defaults.
ATCP 101 - Vegetable
The Perishable Agricultural Commodities Act (PACA) is a federal program that provides some protections for vegetables. This program consists of a priority lien against vegetable-related assets and is applicable to fresh vegetables based on a complex set of variables and circumstances. Wisconsin’s vegetable security program applies only to processing vegetables. Wisconsin’s program uses an indemnity fund, rather than a priority lien-type program.
There may be some limited overlap between the Wisconsin and federal programs, but that overlap is justified because the scope of federal coverage is not entirely clear. Overlap was reduced by Wisconsin legislation, which permits certain potato buyers covered under the federal program to opt out of most of the state program.
ATCP 99 - Grain
Like all states with a significant grain industry, Minnesota, Michigan, Illinois, Indiana, and Iowa all require persons who buy grain from producers to obtain a grain dealer license, and all persons who store grain for others are required to obtain either a state or federal grain warehouse license. Licensees must file financial statements with the state, and the warehouses must maintain 100% of depositor-owned grain in inventory at all times.
Minnesota requires grain dealers and grain warehouse keepers to post bonds with the state. Indiana, Illinois, and Iowa all have a state indemnity fund that is made up of grain dealer and warehouse assessments. Michigan (like Wisconsin) has a combination of bonds and indemnity fund contributions.
ATCP 100 - Milk
Minnesota requires any wholesale dealer or food processor who contracts with other Minnesota dealers or farmers of milk, cream, or products made from milk or cream, to be licensed as a Wholesale Produce Dealer. Dealers are required to obtain a surety bond and required to maintain trust assets so that assets are freely available to satisfy outstanding obligations. There is no exemption to this requirement.
Michigan requires producer security for all manufacturing and Grade A dairy plants that are a first receiving point for raw milk that will be processed at that facility. Security can be in one or more of several forms including bond, letter of credit, certificate of deposit, or pre-payment. There is no exemption to this requirement.
Illinois, Indiana, and Iowa do not require dairy producer security.
ATCP 101 - Vegetable
Minnesota requires any wholesale dealer or food processor who contracts with other Minnesota dealers for fresh fruits or vegetables to be licensed as a Wholesale Produce Dealer. Dealers are required to obtain a surety bond and required to maintain trust assets so that assets are freely available to satisfy outstanding obligations.
Illinois, Iowa, Michigan, and Indiana lack similar programs.
David A. Woldseth
Department of Agriculture, Trade and Consumer Protection
P.O. Box 8911
Madison, WI 53708-8911
Telephone (608) 224-5164
Finding of emergency
Wis. Stat. s. 126.88 (2) (b) obviates the need for an “emergency” finding, as would normally be required under s. 227.24 (1) (a) and (3), Stats. Nonetheless, in this instance, this emergency rule is required for several reasons: • Corrective Rule Mandated by Statute. Wis. Stat. s. 126.88 (2) (a) mandates the department to promulgate a corrective rule when a portion of the Fund falls below the minimum balance required by statute.
• Vegetable Contractors. The permanent rule changes, already approved by the DATCP Board, are unlikely to be in effect by February 1, 2018, the annual licensing assessment date for vegetable contractors.
• Grain Dealers. DATCP is required to take action to ensure the grain dealer portion of the Fund balance stays within statutory thresholds. Without this emergency rule, the grain dealer balance will continue to grow beyond its $6 million statutory maximum. An emergency rule effective date of August 31, 2018 is necessary since the next license year (assessment period) for grain dealers begins September 1, 2018. While Wis. Stat. s. 126.88 (2) (b) lifts the department’s obligation to affirmatively evidence an “emergency” finding, here, an emergency rule is necessary to limit the growth of the Agriculture Producer Security Fund (Fund) balance attributable to grain dealers. Current law requires DATCP to modify fund assessments through rulemaking if fund balances are below or above certain thresholds. For grain dealers, the maximum balance threshold is $6 million. The balance attributed to grain dealers currently exceeds this maximum.
• Milk Contractors. Without this emergency rule, licensed milk contractors will continue to pay more than their equitable share into the Fund. An emergency rule which implements the provisions of the permanent rule with an effective date of April 30, 2018 is necessary since the next license year (assessment period) begins May 1, 2018. This emergency rule is necessary to provide assessment relief to milk contractors contributing to the Agricultural Producer Security Fund (Fund).
Section 1. ATCP 99.126 (2) is amended to read:
(2) Basic assessment.
(a) A contributing grain dealer who reports less than $500,000 in grain payments under s. 126.11 (9) (a), Stats., shall pay a basic assessment equal to the greater of the following amounts:
2. If the fund balance attributable to grain dealers is less than $6 million on May 31 of the last preceding license year, then The the sum of the amounts calculated under s. 126.15 (1) (a) and (b), Stats. (b) A contributing grain dealer who reports at least $500,000 but less than $3 million in grain payments under s. 126.11 (9) (a), Stats., shall pay a basic assessment equal to the greater of the following amounts:
2. If the fund balance attributable to grain dealers is less than $6 million on May 31 of the last preceding license year, then The the sum of the amounts calculated under s. 126.15 (1) (a) and (b), Stats. (c) A contributing grain dealer who reports at least $3 million in grain payments under s. 126.11 (9) (a), Stats., shall pay a basic assessment equal to the greater of the following amounts:
2. If the fund balance attributable to grain dealers is less than $6 million on May 31 of the last preceding license year, then the The sum of the amounts calculated under s. 126.15 (1) (a) and (b), Stats.
Section 2. ATCP 99.126 (3) is repealed and recreated:
(3) Deferred payment assessment. A contributing grain dealer shall pay a deferred payment assessment equal to the amount the grain dealer reports under s.126.11 (9) (b), Stats., in the grain dealer’s license application for that license year multiplied by rates determined as follows:
(a) If the fund balance attributable to grain dealers is greater than $6 million on May 31, the rate is 0.000875 for deferred payment contracts entered into anytime during the following license year.
(b) If the fund balance attributable to grain dealers is not more than $6 million on May 31, the rate is 0.0035 for deferred payment contracts entered into anytime during the following license year.
Section 3. ATCP 100.135 is amended to read:
ATCP 100.135 Contributing milk contractors; fund assessments. (1) General. A contributing milk contractor shall pay an annual fund assessment for each license year. The annual fund assessment shall be calculated under this section, rather than under s. 126.46, Stats. Except as provided in sub. (6) or (10), or s. ATCP 100.13, the annual fund assessment amount is the minimum assessment amount listed in sub. (9) or the sum of the following multiplied by 0.8, whichever is greater:
Section 4. ATCP 101.245 (2) is amended to read: