Agricultural Liens Guide: Taking Advantage of Agricultural Producers’ Priority Lien Right

How Farmers Can Protect Their Agricultural Lien Rights in Texas

Consider this situation: A grain elevator defaults on a loan secured by grain stored in its facilities. Can its creditor seize the grain stored in the elevator, even if that grain is owned by the farmer who delivered it to the elevator? If the farmer has not taken the required steps to perfect an agricultural lien on the produce, the answer is most likely yes.

To prevent this outcome, farmers need to understand how to secure their priority right to payment for their grain through a perfected agricultural lien as described in Texas Property Code Chapter 70, Subchapter E. At Merritt Law, we regularly work with agricultural producers to protect their produce in the type of scenario described above and many others. This guide explains the steps farmers should follow when delivering grain to a contract purchaser or warehouse so their right to payment is properly protected.

What Is an Agricultural Lien?

A lien is a legal claim on property that ensures payment of a debt owed.^[1] An agricultural lien is a legal claim against agricultural produce that secures payment owed to the producer (such as a farmer) who produced it.^[2]

Such a lien attaches to agricultural produce, including, but not limited to, any plant product grown, produced, or harvested as part of farming operations.^[3] The lien benefits the agricultural producer and may be asserted against:

• A contract purchaser who has agreed to buy the produce but has not paid for it; and
• A warehouse storing the produce, including grain elevators or licensed storage facilities, when payment has not been made.

As a key distinction, a perfected agricultural lien has been secured by filing a UCC financing statement with the Texas Secretary of State within the required timeframe.^[4] When perfected, the agricultural lien generally has priority over most competing claims, including security interests held by lenders of the purchaser or warehouse.

We emphasize this type of lien in particular because missing this crucial filing step is one of the most common reasons producers lose priority to other creditors.

Agricultural Lien Rights for Producers Under Texas Law

Under Texas law, a producer who grows agricultural produce and delivers it to a purchaser or a warehouse automatically acquires a statutory agricultural lien to secure payment for the produce. The amount secured by the lien and the manner thereof depend on how the produce is handled.

When a produce is sold to a purchaser, the lien secures either the contract price or, if no price is specified, the market value of the produce on the date of delivery.^[5]

When produce is delivered to a warehouse for storage, the lien secures the market value of the agricultural produce on the delivery date. If the produce is delivered in multiple loads, the valuation date is the date of the first delivery.^[6] However, the statute does not define what constitutes a “series of deliveries,” which can lead to disputes when deliveries occur over extended periods.

Importantly, a producer’s lien rights under Texas Property Code Chapter 70, Subchapter E are mandatory and non-waivable. Any agreement through which a producer waives or limits the right to enforce an agricultural lien against a purchaser or warehouse is void and unenforceable.^[7]

Scope of the Agricultural Lien

An agricultural lien follows both the agricultural produce and the proceeds from its sale to the extent that the agricultural produce is sold,^[8] so long as the proceeds can be traced back to the produce.^[9] The lien applies whether the produce remains in storage or is sold by the purchaser or warehouse.

This protection also applies in open storage situations. If a producer’s grain is mixed with grain owned by the purchaser or warehouse, the producer does not lose lien protection. The lien attaches to a proportional amount of the commingled agricultural produce rather than to specific bushels.^[10] For example, if a farmer delivers 10,000 bushels of grain to a warehouse, where it is mixed with 50,000 bushels already in storage, the farmer’s agricultural lien attaches to 10,000 bushels out of the total 60,000 bushels, not to the exact grain originally delivered.

If the purchaser stores the agricultural produce at a third-party warehouse, the produce is still legally considered in the purchaser’s possession, and the producer’s lien remains in effect.^[11]

Attachment and Duration

The agricultural lien attaches on the date the purchaser or warehouse takes possession of the agricultural produce. For multiple deliveries, attachment occurs on the date of the first delivery.^[12]

Once attached, the lien lasts for one year. It expires on the first anniversary of the attachment date unless properly enforced or satisfied.^[13] As with valuation and filing deadlines, uncertainty surrounding what qualifies as a “series of deliveries” can create complications in determining the lien’s expiration date.

Perfecting the Agricultural Lien

Attachment alone is not enough to protect a producer against competing creditors. Perfection is what establishes priority over most competing claims to the produce.^[14]

Texas law provides a short period of automatic perfection when the agricultural produce is first delivered, but this is only a temporary grace period.^[15] To maintain priority, the producer must file a UCC financing statement within 90 days of:

• The date of delivery, if there is a single delivery, or
• The date of the last delivery, if there is a series of deliveries^[16]

It bears repeating: This automatic perfection is only a short grace period. Producers should not rely solely on this temporary perfection, as it will lapse if the proper steps to perfect the lien are not taken within the required timeframe.

An unperfected lien generally loses priority to other creditors who hold perfected security interests, such as banks that have financed the purchaser or warehouse.^[17] Filing after the deadline can still perfect the lien, but priority may already have been lost to earlier-perfected interests.^[18]

Filing the Financial Statement

To perfect an agricultural lien on agricultural produce, a producer must timely file the UCC financing statement with the Texas Secretary of State. The instructions for doing so can be found here.

A financing statement is a standardized form intended to alert subsequent parties dealing with a debtor (a producer, purchaser, or warehouse) that another claims an interest in the debtor’s (same) personal property.^[19]

The contents of the financing statement must include:

1. The debtor’s name, mailing address, and debtor-type (listed as the debtor on the Financing Statement because it has not yet paid the producer for the agricultural produce);
   1. Name
      1. For registered organizations (corporations, LLCs, LPs, registered trusts, etc.): The entity’s legal name (the name listed on the articles of incorporation/certification of formation). Do not abbreviate or use trade names/DBAs.^[20]
         1. A sole proprietorship is not an organization.
      2. For individuals: If individual possesses an unexpired Texas driver’s license or personal ID, list the individual’s name exactly as it appears on the license/ID (including spacing, hyphens, etc.).^[21] Otherwise, simply list individual’s surname and first name.^[22]
   2. Debtor-Type
      1. Make it clear whether the debtor is an organization or individual.^[23]
2. The secured party (producer)’s name and mailing address;
   1. Naming rules listed regarding debtor’s name are also applicable to secured party’s name (please see Section 3(a)(i) above for discussion).
3. An indication of the collateral (the produce).
   1. The collateral is sufficiently indicated if the financing statement:
      1. Broadly states it covers “all assets” or “all personal property”; or
      2. Provides a description that reasonably identifies the collateral.^[24]
         1. A description can reasonably identify the collateral by providing:
            1. A specific listing: (description of produce year, type of agricultural produce, and land location);
            2. Category: (“Grain”, “Livestock”, “Feed”);
            3. A type of collateral defined in this title (“Farm Products”).^[25]
4. Specify whether the collateral is held in a trust or by a personal representative of a deceased person.
5. (For Paper Filing Only) Check “Agricultural Lien” under 6b of the Financing Statement.
6. Pay the Filing Fee
   1. Electronic Filing – $5
   2. Paper Filing (1-2 pages) – $15
   3. Paper Filing (more than 2 pages) – $30^[26]

Accuracy is critical. The debtor’s legal name must be listed exactly as required by statute, whether the debtor is an individual or a registered entity. The financing statement must also reasonably identify the produce serving as collateral, which can be done by description, category, or reference to farm products.

Priority of a Perfected Agricultural Lien

Once properly perfected, the agricultural lien has priority over most other liens and security interests in both the produce and its sale proceeds^[27]—even if another creditor’s lien attached or was perfected earlier.^[28]

As a result, if the warehouse or purchaser defaults, files bankruptcy, or becomes insolvent, the producer will often be at the front of the line to recover what they are owed via the agricultural produce and its proceeds.

There are limited exceptions, however, including prior liens held by lenders who directly financed the producer’s operations, perfected security interests in company-owned products, cotton ginner’s liens, holders of negotiable warehouse receipts, and certain marketing contracts governed by state or federal law.

Enforcement of Agricultural Liens

A producer may enforce an agricultural lien through litigation. If successful, the producer may recover the amount owed for the agricultural produce, along with attorney’s fees, court costs, and interest.^[29]

If the agricultural produce is sold to a good-faith purchaser without notice of the lien, the buyer generally takes the agricultural produce free of the lien. In that situation, the lien shifts to the sale proceeds rather than the agricultural produce itself.^[30]

Discharge of the Agricultural Lien

An agricultural lien is released when the producer receives full payment, or has voluntarily agreed to defer payment (without coercion) despite payment being offered.^[31]

If the payment for the agricultural produce is received in the form of a check or some other negotiable instrument, the agricultural lien is not considered discharged until the funds are fully collected and available.^[32]

Compliance Is Everything—Merritt Law Can Help

Agricultural lien rights are entirely statutory, and courts strictly enforce the requirements set out in Chapter 70 of the Texas Property Code. Filing deadlines, financing statement accuracy, and delivery timelines all matter. Even small missteps can result in a producer losing priority to other creditors.

Because these rules are technical and fact-specific—and because disputes often arise around delivery timing, valuation, and perfection—it is wise to seek experienced legal guidance.

Merritt Law has extensive experience in agricultural law, including advising clients on lien rights and creditor priority issues. If you are facing a nonpayment situation or want to ensure your lien rights are properly protected, our team can help you evaluate your options, prepare the necessary filings, and protect your interests from start to finish. Reach out to us to get started.

* This article published by Merritt Law is intended for informational purposes only and is not considered legal advice on any subject matter.

^[1] 50 Tex. Jur. 3d Liens § 1 (Oct. 2025).

^[2] Tex. Prop. Code § 70.402.

^[3] Tex. Prop. Code § 70.401(1).

^[4] See Tex. Prop. Code § 70.4045(a).

^[5] Tex. Prop. Code § 70.402(a).

^[6] Id. at (b).

^[7] Tex. Prop. Code § 70.410.

^[8] Tex. Prop. Code § 70.402(c).

^[9] Tex. Bus. & Com. Code § 9.315(a)(2).

^[10] Tex. Prop. Code § 70.402(c).

^[11] Tex. Prop. Code § 70.402(d).

^[12] Tex. Prop. Code § 70.403.

^[13] Tex. Prop. Code § 70.405.

^[14] Tex. Prop. Code § 70.4045(c)(1).

^[15] Tex. Prop. Code §§ 70.403, 70.4045(a).

^[16] Tex. Prop. Code § 70.4045(a).

^[17] Unperfected Security Interest, Black’s Law Dictionary (abr. 10th ed. 2015).

^[18] Tex. Bus. & Com. Code § 9.308(b).

^[19] See Larry Bates, Secured Transactions: Problems and Materials 100 (Newly Rev. 1st ed. 2019).

^[20] Tex. Bus. & Com. Code § 9.503(a)(1).

^[21] Tex. Bus. & Com. Code § 9.503(a)(4).

^[22] Id. at (a)(5).

^[23] Tex. Bus. & Com. Code §§ 9.516(b)(5)(B).

^[24] Tex. Bus. & Com. Code § 9.504.

^[25] Tex. Bus. & Com. Code § 9.108.

^[26] Tex. Bus. & Com. Code § 9.525(a).

^[27] Tex. Prop. Code § 70.4045(c)(1).

^[28] Id.

^[29] Tex. Prop. Code § 70.409.

^[30] Tex. Prop. Code § 70.406(a).

^[31] Tex. Prop. Code § 70.407(a).

^[32] Id. at (b).