Washington state hay growers and their state ag department are researching a proposal to set up an indemnity fund that would reimburse growers for losses resulting from non-payment by dealers.

The Washington State Department of Agriculture (WSDA) already has a program to protect farmers and ranchers from that type of loss. The Commission Merchants Program investigates complaints of non-payment or illegal practices and works with law enforcement agencies. Kirk Robinson, manager of the program, says most complaints are resolved through mediation. But in severe cases, WSDA calls in bonds posted by licensed dealers and uses the money to provide at least partial payment to producers.

In 2006, WSDA called in bonds posted by two hay dealers, one for $20,000; the other for $15,000. But about 20 claimants were owed more than $639,000.

Hay growers have faced similar problems in the past, says Les Wentworth, an Ephrata grower and Washington State Hay Growers Association member. An indemnity fund could help, but the idea is in the early discussion stage and there are many issues to consider, he adds.

Robinson points out that some states have indemnity funds where a small fee is paid on hay and straw purchased by dealers. He says the fund could be held and invested by the state, and fees could be discontinued when the fund reached a predetermined ceiling.

Association president Darin Michel, Othello, says some growers are concerned that an indemnity fund could add another layer of bureaucracy, and there are questions about how it would be administered and whether growers would receive enough benefit. An alternative, says Michel, could be to increase the bonding levels required of dealers.

Before selling to dealers they’re not familiar with, Robinson says growers should call WSDA to find out if there have been any complaints. The best solution, Wentworth adds, is  for growers to use written contracts.

The indemnity fund idea was on the agenda of the association’s recent annual conference in Kennewick.