John Dillard, a principal attorney in the USDA – Packers and Stockyards group, authored the following article on recent amendments to the Packers and Stockyards Act establishing a Statutory Dealer Trust. The article appears in Farm Journal’s mid-February issue.
Cattle dealers play an integral role of the movement of livestock by buying cattle, creating uniform loads of like kind, and quickly selling them to their customers. Under the Packers and Stockyards Act, cattle dealers are required to pay sellers in full by the next business day after purchasing the cattle and taking possession (unless the sale is on credit).
However, sellers can satisfy this one-day requirement by placing a check in the mail. Given the speed of the mail (especially these days), a lot can happen between when a farmer, rancher, or stockyard transfers the cattle and when the check arrives in the mail.
Unfortunately, there are several instances where checks are not honored due to insufficient funds or even worse, the check never shows up.
Historically, unpaid cattle sellers have not typically fared well in recouping their losses when a dealer fails to pay. Even if the dealer still has possession of the cattle, the seller did not have first rights to the proceeds of the cattle. Banks typically had a blanket security interest in a dealer’s assets that took priority over cattle sellers, even if the dealer had not paid for the cattle.