SS 045-18

Statement of Scope

Department of Agriculture, Trade and Consumer Protection (DATCP)

Rule No.:

Ch. ATCP 99 and 100, Wis. Admin. Code (Existing)

Relating to:

Grain dealers and grain warehouse keepers; milk contractors

Rule Type:

Permanent

1. Finding/nature of emergency (Emergency Rule only):

N/A

2. Description of the objective of the rule:

The objective of the proposed rule would be to bring DATCP rules into alignment with two legislative changes affecting the Agricultural Producer Security Fund (Fund), a public trust designed to secure payments to producers in the event of defaults.

ATCP 99 – Grain Dealers

2017 Wisconsin Act 155 amended Wis. Stat. § 126.88 (1) (b) and repealed Wis. Stat. § 126.88 (1) (c). These changes combined minimum and maximum fund balances for grain dealers and grain warehouse keepers contributing to the Fund. The Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) plans to consider whether modifications to grain dealer and grain warehouse keeper assessment formulas are necessary to maintain fund balances between the new statutory thresholds applicable to grain-related contributions, as required by Wis. Stat. § 126.88 (1).

ATCP 100 – Milk Contractors

2017 Wisconsin Act 155 amended Wis. Stat. § 126.46 (1) to require DATCP to establish a deferred payment assessment rate for milk contractors who contribute to the Agricultural Producer Security Fund (Fund) and enter into deferred payment contracts with producers to procure milk. In proposing a deferred payment assessment rate, DATCP plans to consider the increased exposure to the Fund associated with potential future defaults by milk contractors who owe producers for milk procured under deferred payment contracts.

3. Description of existing policies relevant to the rule and of new policies proposed to be included in the rule and an analysis of policy alternatives; the history, background and justification for the proposed rule:

History and background.

The Fund, established by Wis. Stat. § 25.463, is a public trust administered by DATCP. Most milk contractors, grain dealers, grain warehouse keepers, and vegetable contractors (collectively known as contractors) who are licensed by DATCP to obtain milk, grain, or vegetables from producers are required to pay assessments into the Fund annually. Assessment contributions from each industry are accounted for separately but then deposited into one overall Fund. Monies in the Fund are used to settle claims by producers in the event that a contractor defaults on a payment.

Wis. Stat. § 126.88 (1) sets minimum and maximum balances for each industry, as well as a minimum and maximum balance requirement for the overall Fund. In order to achieve these balances, Wis. Stat. ch. 126 establishes detailed assessment requirements for each type of contractor, except that Ch. 126 requires DATCP to establish milk contractor assessments by rule.

Justification for proposed rule.

ATCP 99 – Grain

2017 Wisconsin Act 155 amended Wis. Stat. § 126.88 (1) (b) and repealed Wis. Stat. § 126.88 (1) (c). These changes combined individual minimum and maximum Fund balance requirements for grain dealers and grain warehouse keepers. The new combined minimum is $1.2 million and the new combined maximum is $7 million. Under prior law, individual minimums were set at $1 million and $200,000 and maximums were set at $6 million and $1 million for grain dealers and grain warehouse keepers respectively. Under an existing provision that was unchanged by Act 155, DATCP is required to adjust assessment rates by rule to maintain Fund balances between the statutory thresholds, per Wis. Stat. § 126.88 (1).

ATCP 100 – Milk

Act 155 amended Wis. Stat. § 126.46 (1) to allow milk contractors to enter into contracts with milk producers so as to defer payment for up to 120 days. As amended, the statute requires the provision of financial statements, and, in some instances, individual security, to cover the additional risk arising under such deferred payment contracts. As the Fund could ultimately be responsible for defaults under this type of contract, the Act also creates milk contractor deferred payment assessments and directs DATCP to establish the rates of those assessments by rule.

The legislation creating Act 155 was supported by the Agricultural Producer Security Council, an advisory group of industry members established by Wis. Stat. § 15.137 (1).

Proposed new policies.

ATCP 99 – Grain

Under a recently promulgated emergency rule (EmR 1803) and a proposed permanent rule (CR 17-047), grain dealer assessments were structured to be reduced at any time at which the portion of the Fund attributable to grain dealers exceeds $6 million, which was the former maximum for those dealers. DATCP proposes to evaluate whether additional modifications are necessary to optimize Fund balances between the new statutory thresholds ($1.2 million and $7 million) and to ensure that each industry segment (grain dealers and grain warehouse keepers) contributes assessments commensurate with its default exposure.