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Cargill to fund 529 plans for farmers

NEW YORK --In an effort to seed future loyalty, Cargill Inc. said Wednesday that it would fund 529 college savings accounts for farmers who agree to sell crops to the giant food producer.

Cargill plans through its Harvest Scholars program to contribute to a College Savings Iowa 529 Plan account whenever a farmer makes a grain, corn, wheat or soybeans commitment to the company.

"The 529 money is above and beyond what they're getting paid for the grain," said Mark Tracy, assistant vice president of Cargill's risk management business in Chicago. "It happens as soon as they make the commitment."

Why is an agricultural company getting into the college savings business? Because the competition for crops is getting stiffer. It also saves Cargill money if it knows in advance to schedule trains, barges and other equipment for shipments.

"The competition is increasing because you have more and more biofuel companies on board," said Don Roose, president of U.S. Commodities Inc. in West Des Moines, Iowa. He said farmers typically agree to sell a percentage of their crops four to 10 times a year to get the best prices.

If price is equal, then some farmers may be persuaded to commit, he said, by health coverage or college savings accounts.

A year ago, Cargill launched its Harvest Health program to help grain producers pay for health-care expenses. The program combines a high-deductible health plan with a tax-exempt health savings account. The level of funding that Cargill contributes to an account is based on grain delivery commitments.

Similarly, Cargill's contribution to the Iowa 529 accounts will be dependent on how much farmers pledge.

Cargill estimates that the average deposit will be $1,000 to $2,000, and about 50,000 farm families in 18 states will be eligible to participate.

Tracy said that the idea for a college savings program came about because Cargill employees in the field found that paying for college is a major concern for farmers.

"In order for our business to prosper, we need the farmers to prosper as well," said Tracy.

Cargill approached Vanguard Group, which already provided its 401(k) plan.

"I think this program is a way to help people get started," said John Heywood, a principal at Vanguard, which has 529 plans in 18 states. "It works for both parents and grandparents."

Anyone could set up an account for a child or themselves. The money grows free of federal taxes if it is used for higher education.

Joe Hurley, founder of, an independent Web site that provides information about 529 plans, said he couldn't think of a program similar to Harvest Scholars. But he said "there is a tax consequence for doing this. It's not free to the farmer." That's because the Cargill distribution is considered taxable income.

Vanguard markets the Iowa plan nationally. It currently has about 140,000 accounts and $1.8 billion in assets. Farmers who enroll can choose from among 13 Vanguard investment options.