Kansas Department of Agriculture says practice of limiting grain receipts to “Historical Customers” is inconsistent with Kansas Grain Warehouse Act

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Randy E. Stookey, KGFA General Counsel
Sept. 2, 2016

In a time of record harvests and abundant grain, elevator storage space becomes extremely limited. Because of that, the Kansas Department of Agriculture (KDA) has received questions from industry on whether a state-licensed grain warehouse is required to receive all grain tendered to it from any producer.

The KDA enforces the Kansas Grain Warehouse act, which regulates all state-licensed grain elevators in Kansas. The Kansas Grain Warehouse act requires state-licensed public grain warehouses to “receive for storage or shipment, so far as the available capacity of the warehouse shall permit, all grain in a suitable condition for storage tendered to the warehouse in the usual course of business, without discrimination of any kind.” KSA 34-233(a).

In years past, at another time of bumper crops when elevators found themselves short on space, KDA had provided KGFA with guidance which allowed grain warehouses to post a sign limiting its grain receipts to “historical customers and members.” The intent was to ensure that a facility did not run out of storage space for their customers. Consistent with that guidance, KGFA provided posters to its members stating:

In order to facilitate the proper handling of harvested grain and assure adequate storage space to accommodate high volumes received at harvest, we will only accept grain from historical customers/stockholders at this grain warehouse facility.

However, KDA recently released new guidance to state-licensed grain warehouses on the practice of restricting grain receipts to historical customers, as follows:

The Kansas Grain Warehouse Act prohibits discrimination of any kind in taking grain delivery. The practice of limiting grain delivery to historical customers and/or members would be a form of discrimination, and inconsistent with the requirements of the act.

Based on KDA’s new guidance, KGFA recommends that members with state-licensed facilities remove any poster which states that the facility will “only accept grain from historical customers/stockholders.”

Upon receiving this new guidance from KDA, Chairman Goetzmann and President Tunnell contacted Tim Mehl, Chief of the Warehouse Licensing Division, USDA, Kansas City office. Mehl assured Goetzmann and Tunnell that – for federally licensed grain warehouses – the practice of limiting grain delivery to historical customers and/or members was both reasonable and consistent with the U.S. Grain Warehouse act.

KDA clarified that a grain warehouse maintains the ability to define its available storage space, and allocate that available storage space among its customers. For example, a grain warehouse may limit each customer to no more than 10,000 bushels of storage space. An elevator may also determine how much of its physical capacity to use as a public grain warehouse. In addition, KDA is willing to work with the grain warehouse industry to approve temporary storage during the harvest season, as needed, in order to allow grain warehouses to service all customers.

Please contact KGFA staff with any questions.

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