US cattlemen look for lessons, possible changes after hundreds of ranchers lose millions

The collapse of a Midwest cattle brokerage company that owes hundreds of ranchers as much as $130 million could result in some going under and has others wondering if regulatory changes are needed to prevent similar swindles in the future. Federal agriculture officials filed a complaint last month against Indiana-based Eastern Livestock Co., LLC, accusing it of bouncing checks for livestock purchases and failing to maintain an adequate bond to cover its debts. The company owes money to about 740 ranchers in 30 states, according to the U.S. Department of Agriculture. Three of those owed money have filed a lawsuit to try to force Eastern into involuntary bankruptcy. The average loss of about $175,000 per rancher is enough to put some out of business, said David Scott, president of the Texas and Southwestern Cattle Raisers Association. Many ranchers, unaware that Eastern's checks were no good, tried to pay bills and ended up writing bad checks themselves, ranchers said. Eastern made money mainly by buying calves throughout the South and selling them to feed lots in big cattle states, including Texas and Oklahoma, where they were fattened for slaughter. Federal regulations require such companies to have sufficient bond to cover two days of business activity, although the bond can be less if the two-day amount is more than $75,000. Eastern's bond was only $875,000 even though it was buying what Lane Broadbent of KIS Futures in Oklahoma City described as "monstrous amounts" of cattle each week. Broadbent is among those who advocate an escrow system in which money from cattle buyers would be held in an account until the animals were delivered, and then ranchers would be paid. Now, Broadbent said, some ranchers deliver animals before a buyer's check has cleared. They should be more careful, he said...more