<b>By KEVIN WALKER<br>
Michigan Correspondent</b> </p><p>

LANSING, Mich. — It may not have been a big surprise when the Michigan Farm Produce Insurance Fund reached the $5 million mark ahead of time, but it’s still good news for everyone involved.
That’s because as of Dec. 31 last year, producers who participate in the program no longer have to pay into the fund. Unless the balance goes below $3 million again, there will be no reinstatement of the assessments.<br>

“The high rate of farmer participation and the rate at which the insurance fund reached the $5 million plateau is a direct reflection of the strength and economic viability of Michigan’s agriculture industry,” said Michigan Department of Agriculture (MDA) Director Dan Koivisto in an announcement. “I am pleased the insurance fund has proven to be a strong safety net for our farmers.”<br>

The MDA’s person in charge of managing the program, Jeff Haarer, pointed to high grain prices as the reason for the recent glut of money. “When you look at the commodity prices today, it makes a lot of sense,” Haarer said. “This increase in commodity prices certainly assisted in the assessments increasing and making the $5 million mark faster.”<br>

As recently as May 2007, insurance fund board member and soybean producer Lyle LeCronier said in a published report that assessments under the program would generate sufficient funds to reach the $5 million mark by sometime in 2009. He also said that the board was hoping to be at or near the $3 million mark by the end of 2007.<br>

The MDA’s literature also states that the fund would bring in an estimated annual contribution of $1.1 million. “The prices have pretty much doubled from what was projected,” Haarer said.
The amounts actually collected in 2007 are: first quarter, $786,000; second quarter, $385,000; third quarter, $607,000; and so far in the fourth quarter, more than $600,000. That’s nearly $2.4 million, even before all the funds from the fourth quarter are counted, Haarer said.<br>

The Michigan Farm Produce Insurance Fund was started in 2003. The fund pays farmers, should a farm produce dealer go bankrupt. Premiums are paid by an assessment of .2 percent of the net value of all commodities that are sold to licensed grain dealers, which fund the program. Commodities include, for example, corn, soybeans, dry beans, small grains and cereal.<br>

As an example, under the program if a producer has delivered farm produce valued at $25,000 to a farm produce dealer that does not pay – that is, goes out of business – a participating producer would pay $50 for either 100 percent coverage or 90 percent coverage, depending on the type of agreement.<br>

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 a grain dealer’s failure, pays the producer 100 percent of their loss. Under a price-later agreement, the producer would have been paid $22,500.<br>

Most producers enter into a price-later agreement, not only because of the lower storage fee, but also because they can lock in a price for their grain at another time when grain prices might be higher. Haarer said grain prices are usually higher at a time other than at harvest.<br>

He compared Michigan’s program to Indiana’s, which has ballooned to $13 million. There hasn’t been an assessment for the fund in 14 years.<br>

As an example of what the fund can do, in early 2007 O’Dell Grain of Homer, Mich., went out of business, owing $642,422 to producers. O’Dell’s holdings paid producers $255,586 of the money the producers were owed. The insurance fund picked up the slack, paying producers $347,856, or 90 percent of their claims.