Who needs a grain dealer license: An Iowa grain dealer license is required of most persons who cumulatively purchase 1,000 bushels of grain or more from producers during any calendar month if such grain is delivered within or into the state of Iowa. "Producer" is defined as the owner, tenant, or operator of land in Iowa who has an interest in grain produced on that land. Exceptions to this requirement are: a person who buys less than 1000 bushels per calendar month, a person who is a producer who buys grain for his/her own use as seed or feed, certain seed dealers, certain feed manufacturers, custom livestock feeders, certain “chapter 501” cooperatives and certain renewable fuel producing limited liability companies. Iowa Code Section 203.1(10) specifies who needs a grain dealer license.
Regulations: Iowa Code Chapter 203 defines grain dealers and provides authority for the Iowa Department of Agriculture and Land Stewardship (the department) to establish licensing procedures and to regulate this area of commerce. Iowa Code Chapter 203D provides for establishment of the Iowa Grain Depositors and Sellers Indemnity Fund. The department regulates grain dealers under Iowa Code Chapters 203 and 203D and Iowa Administrative Rules 21 Chapters 91, 92, 93, 94 and 95. These are available for your review online at https://www.legis.iowa.gov/.
License class: There are two classes of grain dealer licenses. A class two license is the "lower" class of grain dealer license. This type of grain dealer license has lower financial requirements and costs, but does have restrictions. A class two license holder may not purchase more than $500,000.00 from producers per fiscal year and may not purchase any grain by credit-sale contract.
A class one license has more stringent financial requirements. There is no limit to the amount of purchases a class one dealer may make. A class one dealer may be authorized to purchase grain by credit-sale contracts.
A credit-sale contract is a contract for the sale of grain pursuant to which the sale price is to be paid more than thirty days after the delivery of the grain to the buyer, and includes, but is not limited to, those contracts commonly referred to as deferred payment, deferred pricing, price later, basis and minimum price contracts. Class one grain dealers may issue credit-sale contracts if they are authorized by the department. To be authorized, the grain dealer must either file a bond or letter of credit in the amount of $100,000.00 or file an audited financial statement (discussed in following section). The authorization to issue credit-sale contracts may be suspended by the department when a dealer fails to meet certain conditions, which are outlined in the regulations.
Financial requirements: Class one grain dealers must maintain a net worth of $75,000.00. Class two grain dealers must maintain a net worth of $37,500.00. All grain dealers must maintain a current ratio of 1:1. (For every dollar of current liabilities you have, you must have at least one dollar of current assets. Current liabilities are the accounts payable, notes and etc. which are due in one year or less. Current assets are the cash, accounts receivable, inventory and notes, etc. which are due in one year or less.)
To issue credit-sale contracts, grain dealers must have a minimum net worth equal to fifty cents per bushel of grain carried on credit-sale contract. Also, the department may suspend the authorization to issue credit-sale contracts if the grain dealer’s debt to asset ratio exceeds .75:1 The department will suspend the authorization to issue credit-sale contracts if the current ratio is less than 1:1 or if the net worth is less than $75,000.
Applicants must file a current financial statement in accordance with rule 21—91.8. After the initial application, grain dealers must file a financial statement within three months of their fiscal year end. These financial statements must be either audited by a certified public accountant (CPA) with an unqualified opinion issued, or they must be reviewed by a CPA. The CPA must be licensed to do business in the state of Iowa. The financial statements must be prepared in accordance with generally accepted accounting principles.
Grain dealers who wish to be authorized to issue credit-sale contracts must either file an audited financial statement, or the bond/letter of credit discussed previously.
Sole proprietor business owners must file a personal financial statement in addition to the financial statement on the sole proprietorship. The balance sheet for the personal financial statement must show the assets both at their historical cost basis (original cost less depreciation) and at their fair market value. In computing the net worth of an individual, the department will value assets at original cost less depreciation and will exclude the value of certain assets which the individual might be able to keep in a bankruptcy situation. This includes the person's house and homestead and various other personal assets. The provisions discussed in this paragraph apply only to individuals, and not to corporations, limited liability companies and bona fide partnerships.
The department will exclude most related party assets from the balance sheet unless the applicant or grain dealer can provide adequate evidence to assure the department that the amounts are collectible. If the related party asset is a current asset, then there shall be adequate evidence to assure the department that the amounts are collectible within one year. Such related party assets usually consist of notes receivable and accounts receivable from stockholders, officers and businesses with common owners. Adequate evidence of value may include the filing of financial statements by the individual or business involved. Exclusion of these related party assets will affect the net worth and may also affect the current ratio.
Grain dealers are required to maintain the minimum net worth and current ratio at all times, not just when the financial statements are filed.
Fiscal year end financial statements must include a balance sheet, income statement, statement of cash flows and the notes to the financial statements. Financial statements for newly formed business may exclude the income statement and statement of cash flows if they are not applicable.
If you need further explanation of the financial requirements or terminology, you should contact an accountant. The accountant will be able to assist you in analyzing how well your company meets the financial requirements.
Costs: The costs which you will incur depend largely upon your business type and size. A major expense in obtaining a grain dealer license is normally the charges made by the CPA. Persons setting up a new company or purchasing another business may also incur legal expenses. The licensing and inspection fees are based upon the amount of purchases which the grain dealer makes per fiscal year and are as follows:
Purchase Amount Annual License Fee Inspection Fee*
35,000 bu. or less $ 66.00 $ 83.00
35,001 bu. to 250,000 bu. $116.00 $125.00
250,001 bu. to 500,000 bu. $166.00 $191.00
500,001 bu. to 1,000,000 bu. $291.00 $249.00
1,000,001 bu. to 1,850,000 bu. $498.00 $307.00
1,850,001 bu. to 3,200,000 bu. $706.00 $274.00
3,200,000 bu. or more $955.00 $440.00
*Grain dealers are generally inspected once or twice per eighteen month period.
A fee for participation in the Iowa Grain Depositors and Sellers Indemnity fund is also charged to new license applicants. This fee is fourteen thousandths of a cent ($0.00014) per bushel of grain to be purchased within the applicant’s first year of operation. A minimum of $50.00 applies and an adjustment to actual will be made at the end of the dealer’s first year. At this time, this participation fee is a one-time fee which only is paid upon license application. However, should the balance in the indemnity fund drop significantly, this fee could be made an annual fee. Should this happen, the grain dealer would also be assessed one quarter of a cent per bushel of grain purchased. The quarter of a cent charge can be passed on to the seller.
Other costs which a grain dealer will incur will include those for forms, data processing and related office supplies and may include the cost of hiring bookkeeping staff.
Records: Grain dealers are required to keep complete and accurate records of all grain purchased. The regulations do specify certain types of records which must be maintained. Grain dealers must maintain a daily grain position record for each type of grain which shows the increase, decrease and ending balance for the amount of grain which the dealer has purchased but not made payment for. (See attached sample) Grain dealers must also utilize pre-numbered settlement sheets and any credit-sale contracts which are used must be prenumbered. All scale tickets must be filed in a daily order, settlement sheets must be filed alphabetically, and contracts must be filed numerically. The department does specify the format and content of some of the forms which a dealer must utilize.
Maintenance of office and business hours: Grain dealers are subject to inspection by the department during the hours of 8:00 A.M. to 5:00 P.M. Monday through Friday. The department makes unannounced inspections. Grain dealers are required to have an office or business location open during these hours. If this requirement places an undue burden on an applicant, the applicant must be prepared to make other satisfactory arrangements with the department. Grain dealers who are located out of state may be contacted by the department and required to bring the records to a location within the state for inspection.
Miscellaneous: If you desire to make application for a grain dealer license, you may contact the department for an application form. An instruction sheet on completing the application and a form GD-2 should accompany the application. These documents may accompany this information sheet. Our address and phone number follow:
Grain Warehouse Bureau
Iowa Department of Agriculture & Land Stewardship
Henry A. Wallace Building
Des Moines, IA 50319-0053