We always obtain the Listing of Potential Buyers for ag products (livestock, crops, etc.) when we originate an ag loan. We also mail a similar "verification" annually to make sure no changes to the list need to be made.

I know the notice itself is a requirement of the Food Security Act of 1985, but does anyone know if there is a specific requirement to update the list periodically? These are always difficult to get back because I don't think the customers really understand them and I am wondering if we really need it signed each year.

Any input is appreciated.

I know of no requirement to keep an update list. The need for an updated list should be a requirement on the part of your bank as it protects your financial institution.

You need to keep abreast of to whom your customer is selling farm products. It's your responsiblity to make sure you have put the appropriate parties on notice, whether it's an Effective Financing Statement filed in a Central Filing state or whether it's a Notification of Security Interest (aka Direct Notification) sent directly to the potential buyers.

This protects the bank by making sure that the checks cut by the potential buyer are jointly made payable to your F/I, if your EFS or Notification is first filed/received.

I am not aware of such a requirement either. Although Mother Nature has been disrupting farming and ranching in Texas over the past several years, I've observed several community banks relax this requirement and not request a list and/or stop sending direct notifications to buyers. But then again, these banks have been "more selective" in which operations to finance and servicing ag customers with well-established backgrounds and a proven track record. In the end, if the farmer/rancher was dishonest, he could always spend a few extra dollars to haul the livestock/crop beyond the surrounding contiguous counties --- which normally are not notified of the bank's security interest (presuming each county has buyers). But then again, in this scenario, I would hope the buyer would be suspicious of a farmer/rancher driving that distance for a transaction.