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May 24, 1999

Protection for Contract Growers Becomes Law

Governor Vilsack signs bill that gives farmers a right to file a lien on their products -- and the bill takes effect immediately.

DES MOINES-- Starting today, Iowa farmers using production contracts as part of their livestock, grain and dairy operations may obtain priority lien protection for payments they are owed under their contracts. The bill, which took effect immediately upon signing today by Gov. Tom Vilsack, enables contract growers to file liens with the Iowa Secretary of State giving them first lien priority for their interests under the contracts.


Attorney General Tom Miller, whose Farm Division worked for more than a year with legislators and farm groups to pass the legislation, said: "Effective immediately, Iowa's contract growers can have financial protection that is superior to all other lienholders. By filing a simple, one-page form with the Secretary of State, farmers can be assured that they hold the best position for full payment should the other contracting party fail to pay as provided under their contracts."


The use of production contracts has risen sharply in Iowa in recent years. Under contract arrangements, farmers normally provide labor and facilities, and contractors provide livestock and feed, for example.


"This law puts farmers first in line if there is a problem," Miller said. "We hope they will never need to use the liens to receive payment, but with today's financial pressures it is best that farmers have access to this type of financial security."


The new law (House File 322) also bans the use of confidentiality provisions in future production contracts and makes confidentiality provisions unenforceable in existing agreements. Miller said confidentiality clauses have been a major obstacle for interested parties who are seeking accurate information about production contracts, including farmers and the Farm Division of the Attorney General's Office. Eliminating the effect of confidentiality clauses will provide farmers access to market information they need to actively examine the various types of contracts available to them, and to choose the agreements most advantageous to their respective operations, he said.


Miller's Office has worked on production contract issues for several years, convening a Production Contract Task Force and developing detailed "Production Contract Checklists" for livestock and grain farmers.


The new law also includes a change in the definition of "feedlot" in Iowa's corporate farming statute, Iowa Code Chapter 9H.


The Farm Division in Miller's Office is arranging a series of luncheon meetings throughout the state to educate farmers about the lien filing process, time requirements for filing, and other facets of the new law. Iowans who would like more information on the meetings may contact the Farm Division at 515-281-5351 or 515-281-8954.

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