Grain Warehousing

Introduction to the South Dakota PUC and Grain Warehousing Oversight

The South Dakota Public Utilities Commission (PUC) is an elected three-member body responsible for regulating various utilities and services within the state, including electricity, natural gas, telecommunications, and notably, grain warehousing and buying under South Dakota law. The PUC's Grain Warehouse Program specifically oversees state-licensed grain warehouses, federally licensed warehouses that also hold state grain buyer licenses, and grain buyers to ensure financial stability, protect producers, and minimize risks in the grain industry. This oversight is crucial in South Dakota, a major agricultural state, where grain storage and transactions involve significant economic value and potential vulnerabilities like insolvency. The program focuses on licensing, bonding, inspections, and financial compliance, but does not regulate all grain transactions, such as voluntary credit sales or broker activities. Key definitions include "public grain warehouse" as any facility receiving grain for storage for hire and "grain buyer" as entities purchasing substantial amounts of grain directly from producers.

Licensing Requirements for Grain Warehouses and Buyers

The PUC administers licensing for grain warehouses and buyers to ensure they meet minimum financial and operational standards. Licenses are required annually and must be renewed by July 1 each year, with the current cycle valid through June 30, 2026. Grain buyers are categorized into three classes based on purchase volumes, use of voluntary credit sale (VCS) contracts, and financial equity requirements:

• Class A + VCS Grain Buyer: Authorized for purchases exceeding $5,000,000 annually, may use VCS contracts (e.g., deferred-payment or price-later), requires $500,000 in equity, grain stock insurance, quarterly balance sheets, and audited or reviewed year-end financial statements.

• Class A – No VCS Grain Buyer: Similar purchase limits but prohibits VCS contracts, requires $250,000 in equity, with the same insurance and reporting obligations.

• Class B Grain Buyer: Limited to $5,000,000 in annual purchases, no VCS contracts, requires $100,000 in equity, and allows compiled year-end statements.

All licensees must maintain positive working capital. Grain warehouses, often operating as buyers, must also comply with these standards. Applications involve submitting financial statements for review, and the PUC maintains a public list of licensed entities, updated regularly, for producers to verify status. Failure to meet requirements can lead to license denial, suspension, or revocation.

Bonding and Financial Compliance

Bonding is a core protective mechanism overseen by the PUC to safeguard producers against losses from warehouse or buyer insolvency. State-licensed grain warehouses must post a bond equal to one-half the local market value of customer-owned grain stored across all locations, with a minimum of $25,000 per municipality or site. Grain buyers require a minimum $50,000 bond, scaled by average three-year purchases. Bonds cover cash sales and stored grain but exclude VCS contracts, which must explicitly state this limitation.

Licensees must report any financial non-compliance to the PUC immediately, as failure to do so is a criminal offense. Warehouses submit monthly storage reports to adjust bond levels based on grain values, and the PUC reviews annual financial statements—audited for higher classes—to ensure ongoing solvency. If deficiencies are found, the PUC may require additional bonds, issue adjustments, or impose management restrictions. Civil fines up to $5,000 per day can be assessed for non-compliance.

Inspections and Enforcement

The PUC conducts regular inspections to verify compliance and reduce risks to producers. State law mandates at least one inspection per licensed facility annually, typically every six to 10 months, reviewing records like daily position reports, scale tickets, warehouse receipts, and VCS contracts. Inspections can last hours to days and may be triggered by producer complaints about payment delays. The PUC also oversees temporary grain storage units, inspecting construction before use.

Enforcement includes investigating complaints, facilitating resolutions, and pursuing bond claims for eligible losses. The PUC assists with both licensed and unlicensed entities, though its authority is stronger over licensees. Producers are encouraged to report issues promptly via the PUC's hotline or email. Grain delivered to warehouses is considered stored unless otherwise arranged.

Protections for Grain Producers and Limitations

The PUC's oversight emphasizes producer protections through financial scrutiny and bonding, reducing insolvency risks. For cash sales, buyers must pay within 30 days of delivery or demand. Producers should verify licensing status, obtain written documentation, and review contracts carefully. However, the PUC does not regulate grain brokers, VCS losses, or contract terms beyond basic requirements. Bond levels are set by the legislature to balance protection and business viability.

Recent Developments

In 2024, the PUC continued routine oversight, including meetings with grain warehouse operators to discuss program operations and industry trends. No major legislative changes were enacted in 2024 or 2025 specifically for grain warehousing, though the state saw increased grain storage volumes, with on-farm storage rising significantly. The PUC issued orders and managed dockets for grain warehouses in 2024 and 2025, handling renewals and compliance issues. As of October 2025, the program remains focused on annual inspections and financial reviews amid stable laws.

Conclusion

The South Dakota PUC's oversight of grain warehousing and buying plays a vital role in safeguarding the state's agricultural economy by enforcing licensing, bonding, inspections, and financial standards. This framework, rooted in South Dakota law, protects producers from financial losses while promoting industry accountability. Producers should engage with the PUC for verification and assistance, contacting them at 1-800-332-1782 or puc@state.sd.us. For the most current information, visit puc.sd.gov or review the guiding South Dakota laws, as regulations may evolve with market needs or legislative updates.