AB 717

This bill makes changes in the agricultural producer security program, which

is administered by the Department of Agriculture, Trade and Consumer Protection

(DATCP). The program is designed to minimize the risk that milk contractors, grain

dealers, grain warehouse keepers, and vegetable contractors (collectively referred to

as contractors) will default on their financial obligations to dairy, grain, and

vegetable farmers (producers) and to reimburse producers for a portion of the losses

they incur when contractors do default. A milk contractor is a person who buys milk

from producers. A grain dealer is a person who buys grain from producers. A grain

warehouse keeper is a person who operates a warehouse for the storage of grain that

belongs to others. A vegetable contractor is a person who buys vegetables from

producers for use in food processing.

Contingent financial backing

Current law requires certain contractors to contribute to the agricultural

producer security fund (fund). If a contributing contractor defaults on its financial

obligations to producers, DATCP makes payments to producers from the fund, up to

a maximum deductible amount per default. Current law requires DATCP to obtain

"contingent financial backing" to supplement the fund in case of a large default. The

contingent financial backing may be in the form of a surety bond or a contract to

provide a cash loan to the fund whenever DATCP requests a loan.

Under this bill, DATCP may, but is not required to, obtain contingent financial

backing for the fund. The bill also authorizes DATCP to obtain contingent financial

backing in the form of trade credit insurance or in any other form that DATCP

determines is appropriate.

Fund assessments

Current law specifies the amounts of contractor fund assessments, but

authorizes DATCP to change the amounts by rule. DATCP has changed the amounts

of fund assessments for milk contractors, and this bill eliminates the statutory

amounts of those assessments.

Current law requires DATCP to modify the amounts of fund assessments as

necessary to keep the overall balance in the fund, and the balance attributable to

each type of contractor, within specified limits. This bill authorizes DATCP to use

emergency rule-making procedures, without making the finding of emergency that

is ordinarily required, to modify fund assessments when the amount in the fund falls

below one of the specified minimums. Such a rule may remain in effect for up to 24

months.

Financial statements

Current law requires a contractor above a specified size threshold to file an

annual financial statement with DATCP. The financial statement must be a

reviewed statement or, for larger contractors, an audited statement.

This bill increases some of the thresholds above which contractors must file