UNDERSTANDING THE PORK INDUSTRY PROFITABILITY CHALLENGE LENDERS EDUCATION EXIT RESPONSIBILITIES Augu

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UNDERSTANDING THE PORK INDUSTRY PROFITABILITY
CHALLENGELENDERS EDUCATIONEXIT
RESPONSIBILITIES August 26, 2008Eldon McAfee
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IOWA DNR RULES ANIMAL FEEDING OPERATION CLOSURE

• As soon as practical but not later than six
  months after the use of an animal feeding
  operation is discontinued, all manure shall be
  removed from the discontinued animal feeding
  operation and its manure control facilities and
  be land applied

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IOWA DNR RULES AFO CLOSURE

• Discontinued animal feeding operation means an
  animal feeding operation whose structures have
  been abandoned or whose use has been discontinued
  as evidenced by the removal of all animals and
  the owner or operator has no immediate plans to
  repopulate.

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IOWA DNR RULES AFO CLOSURE

• Discontinued animal feeding operation structure
  means an animal feeding operation structure that
  has been abandoned or whose use has been
  discontinued as evidenced by the removal of all
  animals from the structure and the owner or
  operator has no immediate plans to repopulate.

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IOWA DNR RULES CFO CLOSURE

• Abandoned confinement feeding operation
  structure means the confinement feeding
  operation structure has been razed, removed from
  the site of a confinement feeding operation,
  filled in with earth, or converted to uses other
  than a confinement feeding operation structure so
  that it cannot be used as a confinement feeding
  operation structure without significant
  reconstruction.

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IOWA DNR RULES CFO CLOSURE/REOPENING

• DNR construction permit required if
• A CFO is closed for 24 months or more and 
• The CFO uses and unformed manure storage
  structure (i.e., earthen) or egg washwater
  storage structure or
• The CFO includes only confinement buildings and
  formed manure storage structures and has an
  animal unit capacity of 1,000 animal units or
  more.

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IOWA DNR RULES CFO TRANSFER

• Transfer of CFO with a DNR construction permit
• DNR must be notified within 30 days of the
  transfer
• Within 30 days of written notification from DNR,
  the transferee must submit all information needed
  by DNR to modify the permit
• DNR requires a new MMP upon transfer
• Must make sure transferee can qualify for all
  matrix points if the permit includes the master
  matrix
• Assign existing manure easements or obtain new
  easements

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IOWA DNR RULES CFO TRANSFER

• Transfer of CFO with a DNR construction permit
• Transferee subject to all conditions and terms of
  the permit (including the master matrix)
• Transferee cannot be an habitual violator under
  Iowa law
• Transferee cannot have a DNR enforcement action
  pending

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IOWA DNR RULES CFO CLOSURE

• Site demolition and cleanup
• Remove and land apply all manure
• If site has an earthen manure storage structure,
  DNR requires all sludge and solids be removed and
  land applied
• Demolish structures
• Earthen once all sludge, solids, and manure
  removed, can fill in or use as a pond need DNR
  review and approval during cleanout and fill-in
• Concrete and buildings DNR solid waste disposal
  rules, including asbestos certification

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IOWA DNR RULES CFO CLOSURE

• Site cleanup Manure storage indemnity fund
• For use by counties for CFO site cleanup if
• County has acquired the CFO due to nonpayment of
  real estate taxes
• County or the DNR determines that the CFO has
  caused a clear, present and impending danger to
  the public health or environment
• County or DNR may seek reimbursement from owner

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IOWA DNR RULES CFO CLOSURE

• Manure Storage Indemnity Fund CFO site cleanup
  includes
• Manure removal and application
• Remediation of any contamination
• Demolition and disposal of structures if they are
  an environmental hazard

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IOWA DNR RULES MISCELLANEOUS ISSUES

• Recent EPC action to deny Dallas County permit
• Proposed rule on manure on frozen or snow covered
  ground
• Master matrix
• Stockpiling

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LIENSFirst priority for payment from livestock
proceeds

• Contract growers - Production contract lien
• Must file UCC-1
• Within 45 days after each group of hogs is
  delivered at the site or
• Within 180 days after livestock is delivered if
  the livestock is delivered monthly or more
  frequently
• May file after these deadline dates, but wont
  have first priority over previously filed UCC-1s
• Also file in any state where hogs will go
• This filing does not result in the contract
  growers name on the packer check unless other
  steps are taken

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LIENSFirst priority for payment from livestock
proceeds

• Contractors (owners of livestock fed under
  contract)
• 2004 So. Dakota case court ruled owner of cows
  under a bred cow lease (lessee received portion
  of calf crop) was required to file a UCC-1 to
  protect its ownership interest in the cows
  against claims of the lessees bank
• File UCC-1 as protective filing
• Owners of pigs fed under contract by a contract
  feeder should consider filing a UCC-1 as a
  protective filing

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LIENSFirst priority for payment from livestock
proceeds

• Landlords (farmland or building owners renting
  out land or facilities)
• Landlords lien (first priority lien on crops and
  livestock)
• Must file UCC-1 with Secretary of State within 20
  days after tenant takes possession
• Also file in any state where hogs, crops, or
  other collateral subject to the lien will be moved

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LIENS Livestock sold - first priority for payment

• Sales of livestock (e.g., SEWs)
• If Seller is not paid by buyer, seller most often
  loses priority in pigs/proceeds to buyers
  secured lender
• Options for seller
• Obtain first priority UCC security interest in
  pigs in sales contract get subordination
  agreement from buyers secured creditor
• Obtain UCC security interest in pigs in sales
  contract and follow Iowa Code requirements to
  obtain a first priority purchase money security
  interest (primarily, this involves filing a
  UCC-1 and notifying buyers secured creditor
  before the pigs are delivered)

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MISCELLANEOUS LEGAL ISSUES

• Iowa Corporate Farming Law
• Manure agreements/easements
• Buyers prepayment for inputs
• Nuisance
• Contract growers - insurance