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RSS By: Steve Cornett, Beef Today

Read the latest blog from Steve Cornett.

Eastern Livestock’s Bond

Nov 16, 2010

After my post yesterday about Eastern Livestock, in which I cited a rumor about the size of the company’s bond, John Robinson at the Western Livestock Journal sent me a note pointing out that GIPSA maintains a website listing the bonds maintained by traders. http://archive.gipsa.usda.gov/psp/dealersBOC_list.pdf

Sure enough, it shows Eastern right at $875,000—vs. more than $80 million in bounced checks and apparently $120 million floating.

I'm going to tell you everything I know about bonding requirements after 55 years of buying and selling livestock and 40 plus years of writing about it. Are you ready? You got time?

Zip. Zero. 

I have always trusted the system. I harvest some cattle, I haul them to the bonded sale or sell them to a bonded order buyer or haul them to bonded feedyard and sell them to a bonded packer and wait, naively, I guess, for my check. I buy some cattle, I write a check and figure I’ve got title to some cattle.

They are, after all, bonded. The Eastern Livestock thing—that’s less than 8 cents on the dollar if I don’t get my zeros mixed up—makes me wonder just what that means. If it means I’m not protected, then I'd rather do what one guy I talked to suggested: Use Paypal. Or at least get a certified check like I would if I was selling to somebody I don’t know.

If you want a fright, look at the list and notice how many of those traders are bonded only to $10,000. That would, apparently, near as I can figure out without more information, be because GIPSA requires bonds covering the AVERAGE of 2 days’ trade. So, a guy who buys 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 2 days.

So if you sell to such a fellow more than his average—say an entire gooseneck load of weaned calves—you’d be protected only to the $10,000 should he default. I’d never seen that site, and--I don’t know about you--but never in my life have I asked a buyer what he means when he says he is “bonded.” I thought it meant if he went broke before my check cashed, his bond would finally pay off.

I mean, these guys aren’t all like your local sale barn, with lots of pipe and good real estate to back up their bets. Many of them don’t have much more than a Rolodex, a fancy pickup and a girlfriend with too much makeup.

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

This all strikes me as curious. I believe we’ll dig into it a little more.

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COMMENTS (12 Comments)

Stockdog - OK
Thomas P Gibson, trying to stay out of jail for writing hot checks filed a personal Chapter 7 bankruptcy. He listed 1 to 10 million in assets and 10 to 50 million in debts. Gibson also filed chapter 7 bankruptcy on his trucking firm East-West Trucking. This fraudster will eventually be put in jail but it will take some time. Folks dont expect any money from Gibson or Eastern Livestock.
12:30 PM Dec 4th
 
asdfghjkl
kypissed; Those "nice barns" up here were not painted using YOUR money. They have been done since Summer. And Gibson isn't to blame. All he wants is for everyone who is owed to be payed, but it is no longer in his hands. Stop blaming him.
5:48 PM Nov 29th
 
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