MINOT, N.D. - When cattle are sold off farms or in sale barns, it isn't usually the end buyer who is doing the bidding. Livestock dealers are the middlemen who often get cattle from point A to point B. While livestock dealers are required to be licensed and bonded, there still are ramifications for sellers and sale barns when a livestock dealer doesn't pay or a check doesn't clear.
"Right now when a livestock market or a producer sells to a livestock dealer and they don't get a check or they get an insufficient funds check, they don't have the ability to get those cattle back," said Chelsea Good, vice president of government and industry affairs and legal at the Livestock Marketing Association. "And we don't think that is right."
Plus, she told a crowd of cattle producers at the North Dakota Stockmen's Association convention in Minot on Thursday, Sept. 19, claims against a livestock dealer's bond may pay out only cents on the dollar.
That's why the Livestock Marketing Association, a trade group for livestock auctions, has been advocating for the U.S. government to enact a livestock dealer statutory trust that would give sellers the first rights to cattle and proceeds of cattle when a dealer doesn't pay.
Good said there are only a dozen or so "five-digit" cases of problems with livestock dealers each year. But every five years or so, a multi-million dollar default comes along that can affect numerous producers and markets.
The 2018 Farm Bill incorporated the idea into a required study to be completed by the U.S. Department of Agriculture's Agricultural Marketing Service, Good explained. The study must be delivered to Congress in December, she said.
AMS, according to a listing in the Federal Register, already has authority over trusts contained in the Packers & Stockyards Act and the Perishable Agricultural Commodities Act that help protect produce sellers and sellers of livestock and poultry to packers.
The protection that could come from a livestock dealer statutory trust is important for Livestock Marketing Association members.
"One of the major customers that sits on our seats and buys is livestock dealers," Good said.
Livestock markets are required to pay sellers by the end of the next business day for cattle sold through the sale ring - often before a dealer's check has cleared on those cattle. That means the markets themselves end up paying for the cattle, with nothing to show for it, if a dealer defaults. And when a dealer buys directly off the farm and doesn't pay, the cattle producer is out the money and often can't get the cattle back.
"When it happens to you, when it's cattle that is your one paycheck for the year, it is really significant," she said.