## Facts

- A farmer operated a hog confinement business financed for years by a bank.
- In 1981, the bank loaned the farmer money and took a broad security interest in farm collateral, including existing and after-acquired livestock and farm products; the bank perfected its interest.
- In December 1983 and January 1984, a cooperative sold livestock feed to the farmer on credit and took purchase-money security agreements.
- The cooperative filed financing statements describing a purchase-money security interest in the feed sold and claiming an interest in the farmer’s feeder hogs and related proceeds.
- The farmer defaulted on obligations to both the bank and the cooperative.
- The cooperative sued to recover collateral; the bank asserted its security interest was a first lien on the hog inventory and sale proceeds.
- The cooperative joined the bank as a defendant and claimed its purchase-money security interest had priority under Iowa’s version of UCC Article 9 priority rules.

## Issues

1. Whether a feed supplier’s purchase-money security interest can obtain priority over a prior perfected blanket security interest in livestock and proceeds under Iowa Code § 554.9312 (1983).
2. Whether a purchase-money security interest in feed extends, for priority purposes, to hogs that consumed the feed when the hogs were already subject to an earlier perfected lien.

## Decision

- The Iowa Supreme Court affirmed the district court’s ruling for the bank.
- The bank’s earlier perfected security interest in the hogs and their proceeds had priority over the cooperative’s later purchase-money security interest.
- The cooperative’s purchase-money priority in feed did not displace the bank’s pre-existing lien in the hogs after the feed was consumed.

## Legal Principles

- Under Iowa Code § 554.9312 (1983), purchase-money priority protects the creditor in the identifiable purchase-money collateral financed by that creditor.
- A purchase-money security interest in an input (such as feed) does not automatically convert pre-encumbered livestock into purchase-money collateral for that input supplier once the input is consumed and no longer identifiable.
- An earlier perfected blanket security interest in existing and after-acquired livestock generally retains priority in the livestock and proceeds absent a statutory rule granting a specific super-priority.
- Statutory interpretation in commercial priority disputes favors readings that are sensible, workable, practical, and logical, and that preserve predictable priority outcomes in secured lending.

## Conclusion

The court held that the bank’s prior perfected blanket lien in hogs and proceeds remained first in priority, and the cooperative’s purchase-money interest in feed could not be extended to prime the bank’s lien in the hogs after the feed was consumed.


Farmers Coop. Elevator Co. v. Union State Bank, 409 N.W.2d 178 (Iowa 1987)