The United States Warehouse Act Continues to Do Its Job

by Kent Politsch

The United States Warehouse Act, administered by USDA Farm Service Agency, is officially 100 years old today, Aug. 11.

Grain Elevator, Terre Haute, Indiana

In 1916, the creation of rules and standards to monitor the storage of farm commodities was a bold new idea. Among its goals was to establish trust — trust between farmer and warehouse owner, trust between warehouses and prospective commodity buyers, and trust among all Americans that its government took actions to stabilize volatile commodity prices.

Woodrow Wilson was president in 1916. The 64^th Congress was in its first session. Among the lawmakers was Asbury Francis Lever, Chairman of the House Agriculture Committee from the 7^th District of South Carolina, who guided the legislation through Congress.

The demand for food production was emphasized by the outbreak of war in Europe. The disruption abroad and the debate within the United States helped to underscore one of the country’s most important security factors – food production.

The challenge Lever and his lawmaking colleagues faced were a lack of adequate storage facilities, a lack of proper controls and standards of such storage systems, an absence of uniformity in methods of operation and issuance of receipts, and too many variations on grading and classification of commodities. And for a farmer to have sufficient funds to pay bills and take care of family through the winter, he needed cash. His stored grain was an asset that could be used as collateral as long as the bank had certainty in the holder of his grain.

After enactment of the Warehouse Act, the very first license was issued to a cotton warehouse in San Antonio, Texas.

Cotton Warehouse in San Antonio, Texas

The first grain license went to Mero Mills in Nashville, Tennessee.

The Act set new standards for storing commodities of all designs, and that standardization has helped American agriculture grow steadily but aggressively.

The Fence Post asked Ned Bergman, Chief, Examination Branch, Warehouse License and Examination Division, Kansas City, if the rules have changed over time. Bergman has been at FSA for 37 of the 100 years the law has been around.

“Probably (the) most significant change was electronic warehouse receipts, which allowed for use of electronic commerce,” said Bergman. “The collection of user fees was significant as it provided a solid funding mechanism for the Act and has insulated it from (other) pressures.”

And what about the next 100 years?

Warehouse Examiner 1930s

“The Act was written to be resilient and flexible,” Bergman said. “More importantly, it still provides the tools desired in the conducting of interstate commerce. The six basic needs of the warehousing industry in 1916; adequate storage facilities, proper control and regulation of such storage systems, uniformity in their methods of operation and the form of receipts issued, grading and classifying standards, and a proper relationship between the storage and banking systems, are still valid today and will be far into the future.”

Farmers today can know with confidence that the grain, cotton and wool that they deliver to a licensed warehouse is kept secure in storage and can be used as collateral to finance their needs until markets are best for selling their commodities.

Celebrating the 100^th Anniversary of the Warehouse Act recently took place in Washington, D.C., sponsored in part by USDA’s Farm Service Agency and the various commodity groups whose industry warehouses are licensed under the Warehouse Act. The FSA also used the timing of the anniversary to bring its team of warehouse examiners to the nation’s capital for updated training and to recognize their important role in maintaining the standards and quality of storing our nation’s agricultural commodities.

“A major objective of this year’s training was to highlight the history of the Act and the significance of its influences and accomplishments,” said Bergman.

FSA Administrator Val Dolcini addresses FSA Warehouse Examiners at USDA Headquarters

According to Sandra Wood, Acting Deputy Administrator for Commodity Operations, the United States Warehouse Act functions today as it was designed 100 years ago. Updated in 2000, time has not altered the need, nor has it affected the quality of the law that has been so important to the agriculture industry.