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New Dealer Statutory Trust to protect livestock sellers

Article-New Dealer Statutory Trust to protect livestock sellers

USDA photo by Preston Keres Cattle salebarn USDA.jpg
Trust ensures cattle sellers receive payment should a livestock dealer become insolvent. 

USDA’s Agricultural Marketing Service announced a new Dealer Statutory Trust to protect livestock sellers. The Consolidated Appropriations Act, signed on December 27, 2020, amended the Packers and Stockyards (P&S) Act by adding Section 318 to establish a “Dealer Statutory Trust” for the benefit of unpaid cash sellers of livestock.

The bill ensures that livestock producers are paid for their animals by requiring dealer trusts. In the current system, dealers frequently buy and resell livestock, often grouping them to meet the volume and type needs of their customers. Dealers are allowed to take possession of livestock and pay for them later, and dealers do not maintain a trust account to guarantee payment.

“USDA supports transparency in pricing throughout the supply chain to ensure farmers and livestock producers are getting a fair price, and we look forward to working with Congress and the federal family to improve price discovery and protect against unfair treatment,” says Robert Bonnie, USDA deputy chief of staff for policy.

Much like the existing packer and poultry trusts, the amendment requires livestock dealers to hold all livestock purchased, and if livestock has been resold, the receivables or proceeds from such sale, in trust for the benefit of all unpaid cash sellers of livestock until full payment has been received by those sellers. Dealers whose average annual livestock purchases do not exceed $100,000 are exempt.

Livestock sellers who do not receive timely payment from a dealer may file claims on the dealer statutory trust. To be valid, trust claims must be filed within 30 days of the final date for making payment, or within 15 business days after the seller receives notice of a dishonored payment. Dealers who receive a trust claim notice are required to give notice within 15 days to anyone holding a lien on the livestock held in the trust, USDA says.

United States Cattlemen’s Association Vice President and Marketing & Competition Committee Chair Justin Tupper says USCA has worked hand-in-hand with the Livestock Marketing Association to help establish a Dealer Statutory Trust to Protect Livestock Sellers.

“When someone defaults on payment to a sale barn or a dealer, there is little to no recourse for the barn or the dealer to receive funds or cattle because the bank has seized all assets - even the ones not paid for that are already in transit. The Dealer Statutory Trust gives the dealer or the sale barn a way to recover losses on cattle that have never been paid for,” adds Tupper.  “Dealer Trust puts producers and livestock markets first in line to recover livestock or any proceeds from them in a dealer default situation. This allows them to recover what is rightly theirs and not be forced out of business by a dealer default.”

The 2018 Farm Bill provided for a USDA study on the feasibility of establishing a Livestock Dealer Statutory Trust, including analysis of the potential impacts a trust would have on livestock producers, dealers, markets, financiers and other parties in the livestock sector.

“I am pleased that USDA has taken the necessary steps to put these protections in place for the benefit of livestock sellers throughout our country,” says Rep. Jim Costa, D-Calif.,  chairman of the House Agriculture subcommittee on livestock and foreign agriculture. “I co-led bipartisan bills to establish this trust in the 115th and 116th Congresses, and I look forward to working with the experts at USDA to ensure farmers and ranchers are not left bearing the costs of dealer defaults.”

In the Senate, Sen. Chuck Grassley, R-Iowa, joined with Sen. Jim Inhofe, R-Okla., and a bipartisan group of colleagues to introduce the Securing All Livestock Equitably (SALE) Act. Quick turnaround between the purchase and resale of cattle by a dealer often leaves the rancher who originally owned the cattle with little recourse if a dealer defaults on a purchase because the livestock has often already been resold.

For assistance with livestock payment concerns or help with filing a claim, unpaid sellers should contact their respective P&S Regional Office, USDA says.

Tupper notes USCA appreciates the work of the USDA in swiftly implementing the Dealer Statutory Trust to Protect Livestock Sellers and “looks forward to working with Congress and the Biden Administration to continuing to improve price discovery and protect against unfair treatment in the U.S. cattle market.”

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