The 2026 legislature adopted amendments to significantly revise South Dakota’s agricultural processor lien statutes, which generally provide a lien on crops to persons who “process” the crops, including threshing, combining, bailing, and related services. The changes to the law expand who may claim a lien and impose strict short deadlines for both lien filing and enforcement. These agricultural processing liens can, in certain instances, take priority over a bank’s prior in time perfected blanket security interest in farm products. Given this potential priority jump, bankers should understand these amendments.
Major Revisions to the Statutes Include:
- Under the revisions, an agricultural processor lien is now available to a custom farming operation that leases equipment used to harvest or process the crops. The change extended lien rights to custom operators and other service providers who process crops using leased equipment in addition to those that own their own machinery.
- Processor liens are now treated as agricultural liens under the UCC and perfected by filing a financing statement with the Secretary of State’s office (as opposed to filing with the Register of Deeds office under the prior law). The financing statement must be filed within sixty (60) days from the date the processing of the crop was finished.
- Even if the financing statement to perfect the lien is timely filed, the lien claimant must commence action to enforce the lien within sixty (60) days after filing the financing statement. If the processor fails to enforce the lien within this relatively short timeline, the lien is automatically terminated.
Banks extending credit to farmers will want to determine if the farmer harvests his or her own crops or if the farmer uses the services of a custom harvester. If the farmer uses a custom harvester, the bank should understand that the custom harvester may take a senior lien on the farmer harvested crops, even where the bank’s lien was filed first. In the event of a default, the bank will want to carefully evaluate the priorities to see if the processor has properly perfected and enforced its lien within the strict time limits imposed by the revised statute. The statutory requirements are rigid and they may present defenses for a bank in a priority fight with a custom harvester. While the agricultural processor lien statutes were revised by both the 2025 and 2026 legislatures, the 2026 revisions will become effective on July 1, 2027 and will therefore be applicable to the 2027 farming season.
Contact a Davenport Evans lawyer at 605-336-2880, [email protected], or find a specific attorney on our Our Lawyers page.
Davenport, Evans, Hurwitz & Smith, LLP, located in Sioux Falls, South Dakota, is one of the state’s largest law firms. The firm’s attorneys provide business and litigation counsel to individuals and corporate clients in a variety of practice areas. For more information about Davenport Evans, visit www.dehs.com.