In a commercial loan setting, bankers are used to thinking of the raw materials, work in process, and products held by people for sale or lease as inventory. The Uniform Commercial Code in section 26-1-9.1-102 specifically codifies this perception.
There is, however, an important exception to this designation. If your borrower is a farmer, grain and seed will not be included in the definition of inventory. This is because the definition of inventory specifically excludes farm products. The term “farm products” is defined as not only crops growing in the field, but also, without limitation, crops grown or to be grown and supplies used or produced in a farming operation.
Although revised Article 9 has simplified the process of taking a security interest in agricultural products, these liens do still differ in application from liens on ordinary equipment and inventory.
Author: Andrew C. Ozete (bio)
Phone: 812.452.3582
email: aozete@bamberger.com
Tags: farm products, raw materials