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We have a UCC financing statement that covers “all crops growing or to be grown,” and we have agreements with the borrower’s grain elevators to issue all checks to both us and the customer as co-payees. The borrower’s input suppliers do not have UCC financing statements covering the customer’s crops. Do we have priority over the input suppliers? – IBA Compliance Connection

IBA Compliance Connection

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We have a UCC financing statement that covers “all crops growing or to be grown,” and we have agreements with the borrower’s grain elevators to issue all checks to both us and the customer as co-payees. The borrower’s input suppliers do not have UCC financing statements covering the customer’s crops. Do we have priority over the input suppliers?

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Generally speaking, a perfected security interest in crops has priority over other unperfected security interests. We are not aware of any Illinois statutes that create a priority or superpriority lien for agricultural input suppliers (as in some other states). Consequently, we believe that this general rule would apply and that your bank would have priority in the sale proceeds as to any input suppliers.

For resources related to our guidance, please see:

  • 810 ILCS 5/9-322(a)(2) (“A perfected security interest or agricultural lien has priority over a conflicting unperfected security interest or agricultural lien.”)
  • 810 ILCS 5/9-322(g) (“A perfected agricultural lien on collateral has priority over a conflicting security interest in or agricultural lien on the same collateral if the statute creating the agricultural lien so provides.”)
  • 810 ILCS 5/9-317(a) (“A security interest or agricultural lien is subordinate to the rights of: (1) a person entitled to priority under Section 9-322; and (2) except as otherwise provided in subsection (e) or (f), a person that becomes a lien creditor before the earlier of the time: (A) the security interest or agricultural lien is perfected; or (B) one of the conditions specified in Section 9-203(b)(3) is met and a financing statement covering the collateral is filed.”)