The recent case of Eastern Livestock’s receivership proceedings, which was filed last week under pressure from Fifth Third Bank, is shedding some light on the dark corners of the beef industry. Many would probably like to keep that quiet. For example, when forced into bankruptcy last week, Eastern had some $80 million in bad checks floating around. They were bonded for $875,000.
The $875,000 figure for Eastern Livestock is actually one of the larger numbers on the list. If you want a fright, look at the list and notice how many of those folks are bonded only to $10,000.
GIPSA requires bonds covering the AVERAGE of two days’ trade. So, a buyer who buys only a few loads of cattle a month, or quite a number of loads for a little while each year, wouldn’t have a very high average over two days.
If a producer sells to such this buyer more than his average—say an entire gooseneck load of weaned calves—you’d be protected only to the $10,000 should he default.
Curiously, the packers carry much larger bonds, according to the web site. Tyson’s bond is more than $88 million. It handles more cattle than Eastern, but nowhere near 100 times more.
See Comments
