By KEVIN WALKER
Michigan Correspondent

LANSING, Mich. — Officials familiar with the program say the Michigan Farm Produce Insurance Fund is on track to meet its financial obligations, despite having made several payouts.
The insurance program was created in 2003 under Michigan law and, starting in January 2005, farm produce dealers, or grain elevators, began collecting funds from producers to finance the program.

Eligible produce includes corn, soybeans, edible beans and wheat.
The insurance program is much like produce insurance programs in other states, except that it’s voluntary, according to Jeffrey Haarer, the Michigan Department of Agriculture’s (MDA) farm produce insurance fund coordinator. “We pretty much looked at what Indiana did,” he said.

According to Haarer, other than in Michigan, only Tennessee’s and Indiana’s programs are voluntary. Out of 30,000-40,000 eligible producers, however, only 60 have opted out.

Imagine a participating producer has delivered produce valued at $25,000 to a farm produce dealer that does not pay – in other words, goes out of business. The participating producer could pay $50 to qualify for either full coverage or 90 percent coverage, depending on the type he or she chooses.

According to insurance fund board member and soybean producer Lyle LeCronier, the two types of agreements are warehouse receipts and price later. The warehouse receipts agreement requires a higher storage fee, but in the event of the grain dealer’s failure, pays the above producer 100 percent of his loss.

Under a price later agreement, that producer would have been paid only $22,500.

“If you want more security, it’s going to cost you more for storage,” LeCronier said.

He believes in the program; decades ago, he lost most of the value of grain he had stored at an elevator after the grain dealer failed and did not pay him. There was no insurance.

LeCronier said he knows of three grain dealers who have gone out of business since the program started. Two payouts have been settled, and one is pending. One payout involved two or three dozen producers and was for $500,000, he said.

Once a producer is paid by the insurance fund, they give up their right to recover anything in court.

It’s estimated that assessments under the program will generate sufficient funds to reach the $5 million cap on the fund by about 2009, assuming no losses are paid out.

Although losses have been paid out, LeCronier stated the board is hoping to be at or near the $3 million mark this year. He said that the fund will “maybe” reach the $5 million mark by 2009.