Pub. 13 2018-2019 Issue 4

WWW.NEBANKERS.ORG 12 COUNSELOR’S CORNER I T HAS BEEN SAID THAT LENDING MONEY IS HARD AND FARMING IS hard, and lending money to farmers is even harder. While probably always true, periods of low commodity prices and difficult weather make lending to farmers especially hard. This axiomparticularly hits home withme, having worked both as an agriculture lender early in my career and as Associate Manager of Federal Crop Insurance at USDA in Washington, DC, during the 1990s. Prudent lenders to any business normally take a security interest in the collateral supporting the loan, and inmost cases, that security interest extends to the proceeds from sales or conversion of the collateral. Often, the lender also requires that the collateral be insured to protect against casualty, reducing the value of the collateral. Typically, payments made under the insurance policy following a claimwill be considered “proceeds” of the collateral and subject to the perfection and priority rules that apply to the collateral. After multiple years of low commodity prices, the collateral supporting a farm operating loan and the cash flow to make required payments is more dependent than ever on the growing crop in the field waiting to be harvested. Thus, the availability of the federal crop insurance proceeds are more important than ever to agriculture lenders. The question is: Are federal crop insurance indemnity payments “proceeds” and covered by the lenders lien? David Bracht, Kutak Rock LLP Whose Crop Insurance is it Anyway? Perfecting a Lenders Lien in Federal Crop Insurance Proceeds.