The Minnesota Grain and Feed Association (MGFA) represents the interests of several hundred country grain elevators and feed mills in Minnesota (first purchasers) and on their behalf, we are submitting comments on the proposed changes to the rules governing promotional councils, particularly the corn check-off.

The MGFA wishes to go on record in opposition to a change to Minnesota Rule 1570.0900, Administration of Promotion Orders, subpart 3 (B), subpart 5, subpart 5 (A) and subpart 5 (C).  We further request a public hearing concerning these parts of the proposal.  The request for first purchasers to remit the check-off fees with the name and address of the producer, amount and date the check-off was deducted and the processor or elevator ID number if applicable, is a totally unreasonable request. 

The collection and remittance of corn check-off fees is currently done without compensation to first purchasers so to ask for an additional commitment of time and resources is a real burden on our agribusinesses.  Before asking for an additional commitment of time and resources from first purchasers, we would first demand that the Minnesota Department of Agriculture and the Councils seriously consider compensation for the collection of check-off fees for "all" commodities.  For example, the State of Indiana provides a 3% "handling fee" for first purchasers and two (2) non-voting seats on their Corn Marketing Council Board.  In addition, we feel that compensation should be offered to first purchasers for time spent working with a promotion council auditor.

We have a great concern over the collection and submission of sensitive grower contact information, especially without knowing how this information will be used and how you intend to maintain the confidentiality and security of the information.  We run the risk of alienating many of our customers and co-op stockholders by asking for and submitting this sensitive data.  First purchasers are also concerned about a possible leak of their (corn) grower and stockholder customer list, which could be used by a competitor or other entity for solicitation or criminal intent.  We encourage the MDA to explore other sources for this type of information (if necessary), such as, the Farm Service Agency, which keeps very detail records on its grower base and should be willing to share its data with a state agency.

The level of sophistication at first purchaser facilities varies greatly throughout the State.  To assume that all first purchasers incorporate a sophisticated computer system for handling the collection and remittance of check-off fees and thus, should easily be able to provide the additional information being requested in this proposal is misguided and simply not the case.  Even where a sophisticated computer system software is utilized, addresses would still have to be manually added, again creating an unworkable, inefficient and totally unreasonable situation for first purchasers. 

A majority of the grain handled by a typical country grain elevator in Minnesota (7.6 million bushels on average) is handled at harvest time, again making this added information request unmanageable and totally unreasonable to expect.  The potential added exposure, as outlined in subpart 5 (A) is unacceptable and has the potential to place first purchasers in jeopardy of litigation (subp. 5, D) for submitting an incomplete list of producers.  This will only lead to harsher criticism of the check-off process and harden our resolve to find an alternative to the collection and remittance of "all" commodity check-off fees.

We were told that the MDA held some outstate "hearings" concerning this proposal yet we have no record of being notified about these hearings and being able to encourage our members to participate in the discussion.  We did receive an invitation in the mail dated July 6 that arrived on "July 14" for a meeting to be held on "July 13" at the MDA office.  The letter was apparently sent to our former mailing address in Minneapolis.  Fortunately, we also received a phone call about the meeting from MDA staff prior to July 14.  Unfortunately, we ended up participating in the meeting on the phone with MDA staff instead of on-site at MDA, due to a MGFA scheduling conflict that day.  We tried to be clear about our concerns at that time but we hadn't had enough time to really assess the situation in that short timeframe.  Our association and the industry we represent accounts for nearly 600 first purchaser locations in Minnesota so we would have expected the MDA to also hold meetings for first purchasers in outstate Minnesota, when proposing such a dramatic and unreasonable change in the collection of check-off fees by first purchasers.  The timing of the release of this proposal and the comment period were, unfortunately, coinciding with a very hectic and unusually late harvest, making it difficult for some of our members to find the time to get familiar with the proposal and to submit comments.  

In reviewing the "Statement of Need and Reasonableness", we have several concerns about some of the assumptions made.  If the role of the MDA in its agreement with the Corn Council is oversight of elections, review of contracts and auditing of their finances, we fail to see the basis for MDA promoting the unreasonable requirement for first purchasers to supply additional and sensitive data on their customers (I).  We would like to know what steps were taken and who was contacted in determining that no less costly or intrusive method is available (IV).  Again, was the Farm Service Agency contacted?  We suspect that no alternative method was even considered (V). 

We take exception to the assertion in the Statement, that the added cost for first purchasers to comply with the additional information being required is "minimal" (VI).  We see this added task as being much more than minimal, both in terms of money and effort.  What is your definition of "minimal"?  How did you determine the amount of time it takes to collect and remit corn check-off fees, in relation to the average salary of the employees potentially performing those tasks?  Based on a recent MGFA salary survey, for example, the "average" salary of an office manager was $54,800, a bookkeeper at $29,800 and general worker at $39,500.  Was the time involved in working with an auditor included in the determination of "minimal" cost?  Unfortunately, all of this additional check-off related work comes at the expense of the other employee duties and responsibilities.  Speaking of minimal, it would seem to us that the possible delay in a producer receiving a refund, as a consequence of "not" adopting this controversial rule, is pretty minimal in itself, when compared to the added workload and expense on first purchaser employees.  Concerning the statutory constraints referenced in 1570.0900, sub. 4, is the MDA afraid to pursue a more logical approach to the timely refund problem, by pursuing a statutory change in language that would relax the statutory timelines for returning refunds?  I would assume the MDA would have Commodity Council and First Purchaser support if this change was pursued, as opposed to burdening first purchasers with these unreasonable demands. 

It was mentioned in the Statement that one of the motivators of this proposal was the participation of MDA in a "LEAN" program, a state government initiative for improving the organizational performance of state agencies.  It doesn't make sense to us to try and improve agency efficiency by burdening first purchasers with a very inefficient data retrieval process, to gain a couple days in the time a refund is sent to a producer.  We find it hard to believe "inefficiency transfer" was one of the "LEAN" recommendations?  

It was stated in the Statement (X) that two meetings were held with affected groups to get input into the proposed changes.  As mentioned earlier, I am aware of one (1) meeting requesting input from first purchasers, farm groups and other interested parties held in St. Paul but it is apparent that more meetings were needed, to gather necessary input on this misguided proposal.  There is the assertion in 1570.0900, subd. 3 that the current refund process is cumbersome and you further assert that this change is reasonable because "the first purchaser has this information already".  This statement alone shows a lack of understanding of the operations of first purchasers, the impossible task of retrieving this information and a lack of acknowledgement of the sensitive nature of that information and ramifications if that information was released into the public domain.    

Country grain elevator and feed mill first purchasers have participated in the collection process of various commodity check-off programs for many years, each with different check-off amounts, reporting periods, forms, etc.  One suggestion we would make is to have one depository for all check-off funds and develop more consistency of the various check-off forms and reporting periods, which would make the collection and remittance process easier to follow and possibly result in fewer delinquencies.  We were never asked if we wanted this new responsibility of collecting commodity check-off fees but were simply given this "unfunded mandate".  We certainly support most of the research and promotion activity that is funded through the various councils, with a few exceptions where check-off funds were used in direct competition with our own industry.  We feel we have legitimate concerns about this proposal and would ask the MDA to reconsider its intent to enact rule changes impacting first purchasers and modify the proposal accordingly.

Sincerely,

Bob Zelenka
Executive Director
Minnesota Grain and Feed Association
3470 Washington Drive, Suite 200
Eagan, MN  55122
Phone 651-454-8212
FAX 651-454-8312
mgfa@usinternet.com
www.mgfa.org