Any person who wants to engage in business as a public warehouse must make written application to the secretary for a license. A copy of the year-end financial statement at an audited or reviewed level must be filed with the application. A proof of in-bound and out-bound scale tickets must be submitted and approved prior to operation. Stock insurance is required. A $10,000 deductible may be used. Once the capacity is determined, appropriate fees and either a bond or irrevocable letter of credit must be in place.
Several items are examined in the financial statements. The allowable net worth must be $25,000 or greater. This amount increases to $50,000 if the warehouse is going to apply for a Uniform Grain and Rice Storage Agreement. If this amount is deficient, the only remedy is a cash injection into the warehouse.
Once the capacity is determined, the allowable net worth requirement is 25 cents per licensed bushel. An elevator with a 1 million bushel capacity would need an allowable net worth of $250,000. If there is a deficiency in allowable net worth, and the minimum ($25,000/$50,000) is met, the warehouse may cover the deficiency with additional bond or an increase in their irrevocable letter of credit. The warehouse must maintain a one-to-one relationship between the current assets and current liabilities. If this is not met, an available line of credit may be used from an appropriate financial institution.
Finally, to be licensed, a warehouse must furnish a bond based on their licensed capacity. The bond must be in favor of the secretary of agriculture. The bond is calculated as follows: 20 cents on the first million bushels, 15 cents on the next million bushels, and 10 cents for every bushel over 2 million. All bonds are rounded up to the next hundred dollars. A warehouse with a capacity of 2.5 million bushels would be calculated as follows:
1,000,000 X .20 = $200,000.00
1,000,000 X .15 = $150,000.00
500,000 X .10 = $ 50,000.00
Total Bond = $400,000.00
The minimum amount for a bond is $10,000 and maximum is $500,000, assuming no deficient net worth to cover.
Grain Warehouse Application