By DOUG SCHMITZ
Iowa Correspondent SPRINGFIELD, Ill. — The USDA’s Farm Service Agency (FSA) has agreed to allow grain and oilseed producers, and warehouse operators participating in FSA’s price support programs to use electronic warehouse receipts (EWRs) on a trial basis for the 2010 crop year using the Springfield, Ill.-based eGrain, Inc. System.
“FSA’s approval of this trial system will now allow participating grain companies to make use of EWRs for all of their business processes,” said Drew Earles, eGrain vice president.
“The use of EWRs will greatly improve the efficiency of business for all participants.”
States approved to participate in the trial system include Arkansas, Illinois, Iowa, Kansas, Missouri, North Dakota, South Dakota and Texas, where warehouse operators can issue electronic receipts to corn, soybean and wheat producers (or their agents) for FSA commodity loans.
Founded in 2003, eGrain developed the electronic warehouse receipt system for the grain industry after witnessing its effectiveness with other commodities, according to company officials.
The FSA approved eGrain in June 2005 to establish and maintain a central electronic filing system for grain and rice warehouse receipts and other United States Warehouse Act (USWA) documents.
The eGrain System was developed using guidelines adopted by the USDA Provider Agreement, Grain Addendum, and Grain Appendix; and the Assoc. of Grain Regulatory Officials (AGRO), formally known as AAWCO, an association of state and federal grain warehouse and buyer licensing authorities.
The U.S. grain industry has been using the eGrain since 2006 to issue, transfer and cancel EWRs for marketing and financial transactions.
During the 2006 crop year, eGrain was the only EWR provider to participate in the USDA Beta Rice Pilot program – where nearly 2,000 EWRs were issued from 18 warehouses in Arkansas, Mississippi and California – which allowed the use of EWRs for rice price support benefits.
“Our proven performance record with FSA and the grain industry should make the implementation of this trial system and the transition to EWRs an efficient process,” Earles said.
Under eGrain’s system, banks, marketing firms and any other entities that may become the holders of warehouse receipts may also participate and eliminate the time and expense associated with physically handling paper warehouse receipts.
In addition, grain and oilseed warehouse operators can now issue EWRs as collateral for loans with lending institutions, for intra-company transactions when relocating grain between warehouses, and as collateral to cover margins and/or meet financial requirements at futures exchanges, company officials said.
EWRs can also be used for transferring ownership between warehouses, processors, ethanol plants and end users, and for transferring ownership through the delivery process at futures exchanges. Producers using eGrain would be able to use EWRs to quickly and efficiently request loans and loan deficiency payments from their FSA county office.
In the United States, EWRs are authorized by federal law and represent title documents, which make them legally equivalent to paper warehouse receipts.
The eGrain System is hosted and housed at a secure, restricted facility that constantly monitors environmental conditions such as heat, humidity and power regulation, allowing subscribers to access historical information and sort data by various categories, company officials said.
In addition, the facility has multiple power and connectivity sources, along with back-up systems in place to ensure the highest level of data protection, accessible 24 hours a day, 7 days a week, company officials added.
To date, eGrain has handled EWRs representing over 219 million bushels of grain and over 158 million cwt. of rough rice since 2006, representing over $3.1 billion worth of commodities receipts.
Currently, CME Group has been using eGrain to handle warehouse receipts delivered in satisfaction of its Rough Rice futures contract since September 2007. CME Group, however, changed the delivery method to shipping certificates from warehouse receipts, beginning with the July 2008 futures contract.
Using warehouse receipts for collateral, Earles said, eliminates the possibility of having to increase the amount posted with CME Group as the value of the grain in store will increase or decrease with market movements.
“The use of the eGrain System is an efficient and cost-effective replacement to costly letters of credit and bonds,” he said.
In March 2009, the Iowa Department of Agriculture and Land Stewardship (IDALS) approved the use of electronic warehouse receipts and electronic contracts for state licensed grain warehouses and grain dealers.
“EWRs will greatly improve efficiencies in Iowa’s grain industry,” said Rich King, eGrain, Inc. president and CEO.
“The IDALS leadership in implementing EWRs and electronic contracts will greatly benefit Iowa grain businesses.”
In the end, with eGrain, Earles added that grain dealers avoid the costs of printing, mailing or hand-delivering contracts to their producers for signatures – especially since grain dealers can sign up their producers free of charge, while producers receive an automated e-mail confirmation when the contracts are issued, settlements are posted and/or the basis changes.
Currently, eGrain has worked with several state FSA agencies throughout the country and offers electronic price and credit sales contracts in many states.
For more information about eGrain, call 800-278-6799, or visit www.egrain.com |
