Senate Study Bill 1151 - IntroducedA Bill ForAn Act 1relating to credit transactions involving agricultural
2items, including by providing for warehouse drying or
3storage liens on crops and by establishing a central filing
4system relating to security interests in farm products,
5providing fees, and including applicability, contingent
6implementation, and effective date provisions.
3Part A
4Principal provisions
5   Section 1.  NEW SECTION.  571A.1  Definitions.
   61.  “Agricultural lien” means the same as defined in section
   82.  “Crop” means any of the following:
   9a.  A plant used for food, animal feed, fiber, or oil, if the
10plant is classified as a forage or cereal plant, including but
11not limited to alfalfa, barley, buckwheat, corn, flax, forage,
12millet, oats, popcorn, rye, sorghum, soybeans, sunflowers,
13wheat, and grasses used for forage or silage.
   14b.  An item having commercial value produced on a tree, vine,
15or bush.
   163.  “Lien” means a warehouse drying or storage lien created
17pursuant to section 571A.2.
   184.  “Possessory lien” means the same as defined in section
   205.  “Warehouse” means the same as defined in section
22   Sec. 2.  NEW SECTION.  571A.2  Warehouse drying or storage
23lien created.
   24A warehouse drying or storage lien is created as a possessory
25lien on a crop delivered by a person to a warehouse acting as a
26bailee under chapter 554, article 7, for the reasonable value
27of services related to the drying or storage of the crop by
28the warehouse. For purposes of chapter 554, the warehouse is
29a secured creditor and lienholder and the person for whom the
30warehouse renders such drying or storage services is a debtor.
31   Sec. 3.  NEW SECTION.  571A.3  Effectiveness, perfection, and
32termination of lien — evidence of delivery.
   331.  a.  A lien becomes effective at the time a debtor
34delivers a crop to a warehouse for drying or storage.
   35b.  The lien is automatically perfected at the time the lien
-1-1becomes effective. The lien is no longer perfected on and
2after March 1 of the calendar year following the calendar year
3that the debtor delivered the crop to the warehouse.
   4c.  The lien is terminated when the warehouse relinquishes
5possession of the crop.
   62.  Evidence of a debtor’s delivery of a crop to a warehouse
7includes but is not limited to a warehouse receipt as described
8in section 554.7202, a scale ticket, or any other reasonable
9evidence of delivery provided by the warehouse to the debtor.
10   Sec. 4.  NEW SECTION.  571A.4  Priority of perfected lien.
   11During the period that a lien is perfected under section
12571A.3, the lien has priority over any conflicting security
13interest in or agricultural lien on the crop, regardless of
14when such security interest or agricultural lien is perfected.
15   Sec. 5.  NEW SECTION.  571A.5  Enforcement of lien.
   16During the period that a lien is perfected under section
17571A.3, the warehouse may enforce the lien in the same manner
18as an agricultural lien is enforced pursuant to chapter 554,
19article 9, part 6. The warehouse may also enforce the lien by
20exercising a right of setoff for the reasonable value of drying
21or storage services upon the sale of the crop by the debtor
22during the period that the lien is perfected.
23   Sec. 6.  NEW SECTION.  571A.6  Other security interests or
24liens held by warehouse.
   251.  This chapter does not affect a possessory lien held by
26a warehouse under section 554.7209, subject to the relevant
27provisions of chapter 554, article 7.
   282.  This chapter does not affect a warehouse’s position as a
29secured party or holder of an agricultural lien under chapter
30554, article 9.
32Conforming PROVISIONS
33   Sec. 7.  Section 554.7209, Code 2021, is amended by adding
34the following new subsection:
35   NEW SUBSECTION.  6.  A warehouse that is a lienholder under
-2-1this section may enforce a warehouse drying or storage lien as
2provided in chapter 571A to the extent allowed in that chapter
3and in lieu of the lien created pursuant to this section.
4   Sec. 8.  Section 570A.5, subsection 1, Code 2021, is amended
5to read as follows:
   61.  a.  The lien shall have priority over a lien or
7security interest that applies subsequent to the time that the
8agricultural supply dealer lien is perfected.
   9b.  Notwithstanding paragraph “a”, the lien shall not have
10priority over a warehouse drying or storage lien during the
11period that the warehouse drying or storage lien is perfected
12under section 571A.3.
13   Sec. 9.  Section 571.3A, subsection 2, Code 2021, is amended
14to read as follows:
   152.  a.  A harvester’s lien that is perfected under section
16571.3 shall have priority over a conflicting security interest
17in harvested crops regardless of when such security interest is
18perfected. A perfected harvester’s lien shall have priority
19over a conflicting landlord’s lien as provided in chapter 570,
20regardless of when such landlord’s lien is perfected.
   21b.  Notwithstanding paragraph “a”, the harvester’s lien
22shall not have priority over a warehouse drying or storage lien
23during the period that the warehouse drying or storage lien is
24perfected under section 571A.3.
25   Sec. 10.  Section 579B.4, subsection 4, paragraph a,
26subparagraph (2), Code 2021, is amended to read as follows:
   27(2)  Notwithstanding subparagraph (1), a commodity
28production contract lien shall not be superior to a any of the

   30(a)  A warehouse drying or storage lien during the period
31that the warehouse drying or storage lien is perfected under
32section 571A.3.
   33(b)   Acourt-ordered lien provided in section 717.4. or a
   34(c)   Aveterinarian’s lien created under chapter 581, if such
35lien is perfected as an agricultural lien.
3   Sec. 11.  APPLICABILITY.  This division of this Act is
4applicable to a crop delivered by a debtor for drying or
5storage to a warehouse on and after the effective date of this
6division of this Act.
9   Sec. 12.  Section 554.9102, subsection 4, Code 2021, is
10amended to read as follows:
   114.  Federal Food Security Act.
   12a.  For purposes of the Federal Food Security Act, 7 U.S.C.
13§1631, written notice shall be considered to be received by the
14person to whom it was delivered if the notice is delivered in
15hand to the person, or mailed by certified or registered mail
16with the proper postage and properly addressed to the person to
17whom it was sent. The refusal of a person to whom a notice is
18so mailed to accept delivery of the notice shall be considered
   20b.  This subsection is repealed on the date that this
21division of this Act is implemented as provided in this
22division of this Act.
23   Sec. 13.  NEW SECTION.  554C.1  Definitions.
   24As used in this chapter, unless the context otherwise
   261.  “Buyer” means any of the following:
   27a.  A person who, in the ordinary course of business, buys
28farm products from a person engaged in farming operations who
29is in the business of selling farm products.
   30b.  A commission merchant.
   31c.  A selling agent.
   322.  “Central filing system” means a system for filing
33effective financing statements, and statements amending,
34continuing, or terminating effective financing statements,
35established under section 554C.4.
   13.  “Commission merchant” means a person engaged in the
2business of receiving any farm product for sale, on commission,
3or for or on behalf of another person.
   44.  “Crop year” means the calendar year in which a crop is or
5will be harvested, animals are born or acquired, or poultry or
6eggs are or will be sold.
   75.  “Effective financing statement” means a financing
8statement required to be filed as part of the central filing
9system as provided in section 554C.6.
   106.  “Secretary” means the secretary of state.
   117.  “Security interest” means an interest in farm products
12that secures payment or performance of an obligation in the
13same manner as provided in chapter 554.
   148.  “Selling agent” means a person, other than a commission
15merchant, who is engaged in the business of negotiating the
16sale and purchase of a farm product on behalf of a person
17engaged in farming operations.
   189.  “Signature” means a symbol used to sign, execute, or
19otherwise adopt a record or a process used to encrypt or
20similarly process a record, in whole or in part, with the
21present intent of authenticating the record for purposes of
22identifying the person adopting or accepting the record.
23   Sec. 14.  NEW SECTION.  554C.2  Special definitions.
   24To every extent consistent with the application of federal
25law, unless the context otherwise requires:
   261.  “Agricultural lien” means the same as defined in section
   282.  “Approved unique identifier” means a number, combination
29of numbers and letters, or other identifier selected by the
30secretary using a selection system or method approved by the
31United States secretary of agriculture.
   323.  “Debtor” means a debtor as defined in section 554.9102
33who has an interest other than a security interest or lien in a
34farm product, or any other person who owns a farm product and
35subjects the farm product to a security interest whether or not
-5-1that person owes a debt to the secured party.
   24.  “Farm products” means the same as defined in section
   45.  “Farming operation” means the same as defined in section
   66.  “Secured party” means a secured party as defined in
7section 554.9102 in whose favor a security interest in farm
8products is created.
   97.  “Security interest” means an interest in farm products
10that secures payment or performance of an obligation in the
11same manner as provided in chapter 554.
12   Sec. 15.  NEW SECTION.  554C.3  Chapter consistent with
13uniform commercial code.
   14This chapter shall be interpreted in conjunction with
15chapter 554, and terms and phrases used in this chapter shall,
16to every extent practicable, be interpreted consistently with
17chapter 554, article 9.
18   Sec. 16.  NEW SECTION.  554C.4  Central filing system —
19establishment and certification.
   201.  The secretary shall establish and administer a central
21filing system, which shall provide for the electronic filing
22and examining of effective financing statements and statements
23amending, continuing, or terminating effective financing
24statements on a statewide basis.
   252.  The central filing system shall be designed to allow
26persons to file and examine effective financing statements
27using the internet. The secretary may provide for the
28filing and examining of statements amending, continuing, or
29terminating effective financing statements in a paper format.
   303.  The central financing system must comply with the
31requirements set forth in 7 U.S.C. §1631, and must be certified
32by the United States secretary of agriculture prior to the date
33that this division of this Act is implemented.
34   Sec. 17.  NEW SECTION.  554C.5  Filing requirements.
   351.  The secretary shall provide for filing effective
-6-1financing statements, and statements amending, continuing, or
2terminating effective financing statements, as provided in
3this section. The secretary shall prescribe all forms to be
4used for filing. The presentation of a statement for filing
5by a secured party and the acceptance of the statement by the
6secretary constitutes filing under this section.
   72.  An effective financing statement is valid if the
8statement substantially complies with the requirements of this
9section and section 554C.6 even though it contains minor errors
10that are not seriously misleading.
   113.  An effective financing statement must be an original or
12reproduced copy which is signed by the secured party and the
13debtor. If filed electronically, the debtor is not required to
14sign the effective financing statement. The statement must be
15filed with the secretary by the secured party. The secretary
16shall record the date and hour of the filing of the effective
17financing statement.
   184.  An effective financing statement must contain all of the
   20a.  The name and address of the secured party.
   21b.  The name and address of the debtor.
   22c.  The approved unique identifier of the debtor.
   23d.  A description of the farm products subject to the
24security interest, the county in Iowa where the farm products
25are produced or will be produced, the crop year unless every
26crop of the farm product in question for the duration of
27the effective financing statement is to be subject to the
28particular security interest, and further details of the
29farm products subject to the security interest if needed to
30distinguish it from other quantities of farm products owned by
31the same person or persons but not subject to the particular
32security interest.
   33e.  Information that the secretary requires to comply with 7
34U.S.C. §1631 or to administer this section.
   355.  The effective financing statement may cover more than one
-7-1farm product located in more than one county.
   26.  A continuation statement shall be signed by the secured
3party, identify the original effective financing statement by
4file number, and state that the original financing statement
5is still effective.
6   Sec. 18.  NEW SECTION.  554C.6  Effectiveness.
   71.  An effective financing statement shall remain effective
8for a period of five years from the date of filing, subject to
9extensions for additional periods of five years each by filing
10or refiling a continuation statement within six months before
11the expiration of the five-year period.
   122.  Upon timely filing of a continuation statement, the
13effectiveness of the original financing statement shall be
14continued for five years after the last date to which the prior
15filing was effective, whereupon it shall lapse unless another
16continuation statement is filed prior to the lapse. Succeeding
17continuation statements may be filed in the same manner to
18continue the effectiveness of the original effective financing
   203.  The effective financing statement shall be amended in
21writing to reflect a material change within three months of the
22material change. The amendment shall be signed and filed as
23required for an original effective financing statement. If the
24statement is filed electronically, the signature of the debtor
25shall not be required.
   264.  a.  The effective financing statement lapses upon the
27expiration of the effective period of the effective financing
28statement or is terminated upon the filing of a statement
29signed by the secured party that the effective financing
30statement is terminated.
   31b.  If the effective financing statement has not lapsed or is
32not terminated and there are no outstanding secured obligations
33and no commitments to make advances, incur obligations, or
34otherwise give value, the debtor may notify the secured party
35in writing to terminate the effective financing statement.
   1c.  Until the debtor instructs the secured party in writing
2to terminate the effective financing statement, the secured
3party has no obligation to terminate the effective financing
   5d.  Within thirty days after receipt by the secured party
6of the statement from the debtor to terminate the effective
7financing statement, the secured party shall file with the
8secretary a termination statement with respect to the effective
9financing statement.
10   Sec. 19.  NEW SECTION.  554C.7  Master list — organization
11and contents.
   121.  The secretary shall compile the effective financing
13statements into a master list.
   142.  The master list shall be organized according to farm
15products. The master list shall contain information required
16to be contained in effective financing statements filed with
17the secretary. The secretary shall arrange the master list for
18each farm product as follows:
   19a.  In alphabetical order according to the last name of the
20individual debtors or, in the case of debtors doing business
21other than as individuals, the first word in the name of such
   23b.  In numerical order according to the approved unique
24identifier numbers of the debtors.
   25c.  Geographically by county.
   26d.  By crop year.
   273.  The master list shall include information regarding
28buyers who register with the secretary on forms prescribed by
29the secretary as provided in this section.
   304.  The secretary shall maintain a list of all buyers of farm
31products who register with the secretary. A buyer registering
32with the secretary shall complete forms requiring all of the
33following information, as prescribed by the secretary:
   34a.  The name and address of the buyer.
   35b.  The interest of the buyer in receiving the list.
   1c.  The farm products in which the buyer has an interest.
2   Sec. 20.  NEW SECTION.  554C.8  Master list — distribution
3and inquiries.
   41.  The secretary shall distribute to each registered buyer a
5copy in written, printed, or electronic form of those portions
6of the master list relating to farm products in which the buyer
7has registered an interest. The secretary may provide for the
8distribution of the master list or portions of the list on any
9other medium requested by a registered buyer. If a registered
10buyer so requests, the information provided to the buyer may
11be limited to a county or group of counties where the farm
12products are produced or to a crop year or crop years or to a
13combination of those identifiers.
   142.  Distribution is subject to all of the following:
   15a.  The distribution shall be by first class or electronic
   17b.  The secretary shall adopt rules pursuant to chapter 17A
18establishing the dates upon which the quarterly distributions
19will be made, the dates after which a filing of an effective
20financing statement will not be reflected on the next quarterly
21distribution of lists, and the dates by which a buyer must
22complete a registration to receive the next quarterly list.
   233.  The secretary shall remove information pertaining to
24lapsed and terminated effective financing statements from the
25master list prior to preparation of the lists required to be
   274.  Upon written notice to the secretary by a registered
28buyer requesting termination of the distribution of the
29list to the registered buyer, the secretary shall terminate
30distribution of the list to the registered buyer.
   315.  Oral and written inquiries by a buyer not registered
32pursuant to section 554C.7 may be made to the secretary during
33hours determined by the secretary.
   34a.  The secretary may provide for a computerized system
35for inquiry and confirmation which may be used in lieu of the
-10-1inquiry and confirmation system otherwise provided for in this
   3b.  Written confirmation of the information provided orally
4in response to the inquiry shall be delivered by first class
5mail or electronic mail to the buyer, at an address provided
6by the buyer, by the secretary not later than the second
7regular business day following the day on which the inquiry was
   96.  In order to verify the existence or nonexistence of a
10security interest, a buyer may request a seller to disclose the
11seller’s unique identifier number.
12   Sec. 21.  NEW SECTION.  554C.9  Perfection — creation of
13superior interests.
   141.  If a buyer fails to register with the secretary prior
15to the purchase of farm products, the buyer takes subject
16to a security interest in the farm products only if the
17secured party has filed an effective financing statement that
18covers the farm products being sold, and the buyer could have
19discovered the existence of the effective financing statement
20prior to the purchase by accessing the database containing
21effective financing statements filed electronically with the
   232.  If the buyer registers with the secretary prior to the
24purchase of the farm products, the buyer takes subject to a
25security interest in the farm products only if the secured
26party has filed an effective financing statement that covers
27the farm products being sold, and the buyer does not secure
28a waiver or release of the security interest as specified in
29the effective financing statement from the secured party.
30If a buyer in the ordinary course of business buying farm
31products covered by the central filing system as provided in
32section 554C.4 tenders to the seller the total purchase price
33by means of a check or any other form of payment payable to
34such seller and each security interest holder of the seller
35identified in the central filing system for such products and
-11-1if such security interest holder authorizes the negotiation
2of such check or other form of payment, such authorization or
3endorsement and payment thereof shall constitute a waiver or
4release of the security interest specified to the extent of
5the amount of the instrument. Such waiver or release of the
6security interest shall not serve to establish or alter in any
7way security interest or lien priorities under Iowa law.
8   Sec. 22.  NEW SECTION.  554C.10  Fees.
   91.  The secretary shall establish fees for initially filing
10an effective financing statement, or a statement amending,
11continuing, or terminating an effective financing statement.
12The fees shall not be more than provided for filing financing
13statements as provided in section 554.9525.
   142.  The secretary may charge a buyer a fee for registering to
15receive a master list or for receiving responses to inquiries
16which are accessed in a printed format. The secretary shall
17not charge a buyer a fee for registering to receive a master
18list or for responding to buyer inquiries, including by
19examining or printing effective financing statements, and
20statements amending, continuing, or terminating effective
21financing statements which are accessed in an electronic
   233.  All moneys received by the secretary under this section
24shall be handled in the same manner as repayment receipts, as
25defined in section 8.2, and shall be used by the secretary
26exclusively for the administration of this chapter.
27   Sec. 23.  NEW SECTION.  554C.11  Rules.
   28The secretary shall adopt rules pursuant to chapter 17A
29necessary or desirable to administer this chapter.
   311.  Except as provided in subsection 2, the provisions of
32this division of this Act shall only be implemented, including
33administered and enforced, on the first business day that
34occurs ninety calendar days after federal certification of the
35central filing system as provided in this division of this Act
-12-1pursuant to 7 U.S.C. §1631.
   22.  The secretary of state shall adopt rules pursuant to
3section 554C.11 necessary or desirable to implement, including
4administer and enforce, the provisions of this division of this
5Act beginning on the effective date of this division of this
   7a.  To the extent that the secretary of state determines it
8necessary to obtain federal certification of the central filing
9system as provided in this division of this Act pursuant to 7
10U.S.C. §1631, the secretary of state may adopt rules providing
11for a waiver or modification of a provision of this division
12of this Act, or may supplement a provision of this division of
13this Act.
   14b.  A rule adopted pursuant to paragraph “a” shall be
15rescinded by its own terms not later than July 1 of the
16legislative session succeeding implementation of this division
17of this Act. Prior to that legislative session, the secretary
18of state shall propose legislation to the general assembly
19necessary to comply with the certification requirements of 7
20U.S.C. §1631.
   213.  Upon federal certification of the central filing system
22as provided in this division of this Act pursuant to 7 U.S.C.
23§1631, the secretary of state shall provide notice of the
24implementation date in three consecutive issues of the Iowa
25administrative bulletin prior to the implementation date. The
26secretary of state shall forward a copy of the notice to the
27Iowa Code editor prior to its first publication. Until the
28implementation date of this division of this Act, persons
29shall take subject to or free of a security interest in the
30same manner and according to the same procedures applicable
31immediately prior to the implementation date of this division
32of this Act.
33   Sec. 25.  EFFECTIVE DATE.  This division of this Act, being
34deemed of immediate importance, takes effect upon enactment.
1The inclusion of this explanation does not constitute agreement with
2the explanation’s substance by the members of the general assembly.
   3GENERAL. This bill provides for credit transactions
4involving agricultural goods which include crops (e.g., grain)
5and other farm products usually governed by Iowa’s version
6of the Uniform Commercial Code (UCC), Code chapter 554, by
7regulating the commercial relationships existing between
8debtors, creditors, and buyers. It also provides for special
9applicability, implementation, and effective date provisions.
   10WAREHOUSE DRYING OR STORAGE LIEN. The bill creates new
11Code chapter 571A which provides for a special lien referred
12to as a warehouse drying or storage lien imposed in favor of a
13warehouse (secured party or lienholder) upon a crop delivered
14by a debtor (e.g., farmer) for reasonable expenses relating to
15drying and storing the crop. During the period that the lien
16is perfected, it has priority over any competing creditor’s
17interest. Thus, a warehouse could enforce the lien before
18all other competing security interests and statutory liens,
19including agricultural liens, and common law liens regardless
20of if or when the competing security interest or lien was
21perfected. In this case, the lien is created as a possessory
22lien in favor of the warehouse acting as a special type of
23creditor serving as custodian and referred to as a bailee
24(see Code chapter 554, article 7). The lien is automatically
25perfected at the time the warehouse takes possession of the
26crop. The warehouse’s special perfection status expires on
27March 1 of the calendar year following the calendar year that
28the debtor delivered the crop to the warehouse. The lien
29is terminated when the warehouse relinquishes possession of
30the crop. During the period that the lien is perfected, the
31warehouse may enforce the lien in the same manner provided for
32perfected agricultural liens under the UCC. The new lien does
33not affect other possessory liens, or other security interests
34or agricultural liens that may be held by the warehouse. The
35lien is applicable to a crop delivered by a debtor for drying
-14-1or storage to a warehouse on or after July 1, 2021.
   2BACKGROUND. Under Iowa’s version of the UCC, article 9,
3a security interest is created by a contract referred to as
4a security agreement executed by a creditor and debtor in
5exchange for obtaining a loan (Code section 554.9201). The
6security interest is said to attach to the debtor’s collateral
7(Code section 554.9203) and based on that agreement the
8creditor may perfect the security interest and obtain priority
9over the covered collateral among competing creditors when
10enforcing the debt (Code section 554.9308). There are several
11ways in which a creditor may perfect a security interest,
12including by possession. Possession is used to perfect a
13general warehouse lien allowed under Code chapter 554, article
147 (Code section 554.7209). More commonly, a security interest
15is perfected by filing a financing statement (referred to as
16a UCC-1) with the secretary of state (Code section 554.9308).
17In addition, various Code chapters existing outside the UCC
18create agricultural liens in commodities produced by a farming
19operation. An agricultural lien is a statutory lien that
20may secure the payment of a financial obligation associated
21with commodity production, and is not necessarily possessory,
22meaning that it may continue to cover the commodity after
23harvest and delivery (Code section 554.9102(1)(e)). An
24agricultural lien is also perfected by filing a financing
25statement with the secretary of state (Code section 554.9338).
   26CENTRALIZED FILING SYSTEM. The bill creates a centralized,
27statewide filing system (system) for security interests in
28farm products to notify buyers of farm products subject to an
29attached security interest. Farm products include goods other
30than standing timber produced as part of a farming operation
31and includes crops, aquatic goods, livestock, supplies used
32or produced on the farming operation, or products of crops or
33livestock in an unmanufactured form (Code section 554.9102).
34The system must be certified by the United States department
35of agriculture. The bill allows a person who has a secured
-15-1interest attached to farm products to complete and file a
2document referred to as an effective financing statement
3or a statement amending, continuing, or terminating the
4effective financing statement, with the secretary of state.
5The secretary must compile information contained in the
6effective financing statements into a master list organized
7according to farm products which the secretary must regularly
8distribute to buyers of farm products registered with the
9secretary. The secretary may also respond to verbal or
10written inquiries by buyers including unregistered buyers and
11deliver a written confirmation to inquiring buyers regarding
12whether a farm product is subject to a security interest. If
13a buyer registers with the secretary prior to the purchase
14of farm products, the registered buyer takes subject to the
15security interest only if the secured party has filed an
16effective financing statement that covers the farm products
17being sold, unless the registered buyer secures a release of
18the security interest. If a buyer fails to register with the
19secretary, the buyer takes subject to the security interest
20only if the secured party has filed an effective financing
21statement that covers the farm products, and the buyer could
22have discovered the existence of the effective financing
23statement by conducting an inquiry and receiving a response and
24confirmation. The bill authorizes the secretary to establish
25fees for secured parties filing effective financing statements
26and buyers registering with the secretary. The secretary must
27adopt rules as necessary to implement, administer, and enforce
28the provisions of the system. The system becomes effective on
29the first business day occurring 90 days after certification by
30the United States department of agriculture and publication of
31three successive notices in the Iowa administrative bulletin.
   32BACKGROUND. Article 9 of the UCC provides an exception for
33buyers in the ordinary course of business who generally take
34free of a security interest created by the seller even in cases
35in which the security interest has been perfected and the buyer
-16-1is aware of its existence (Code section 554.9320). However,
2notwithstanding this exception, a buyer who purchases a farm
3product from a person engaged in farming operations may not
4take free of a security interest. The federal Food Security
5Act of 1985, in relevant part (7 U.S.C. §1631), preempts the
6state’s article 9 requirements by providing that a buyer in
7the ordinary course of business, a commission merchant, or a
8selling agent (all classified under the term “buyer”) may buy
9farm products without being subject to a security interest
10created by the seller but only if the buyer does not have
11actual or constructive notice of that security interest. The
12federal law allows states to elect between two notification
13options: (1) Iowa’s current law requiring the secured party to
14deliver direct notice to potential buyers of a secured party’s
15interest in the farm products within one year prior to sale,
16or (2) the system described in the bill. In either case, the
17federal law does not supersede article 9 requirements that
18establish priorities among creditors.