Livestock Packers, Dealers and Market Agencies Surety Bond

Bond Penalty: Average two days business, $10,000 minimum

The Packers and Stockyards Act (P&S Act) was passed in to law in 1921, to regulate meat packer activity and livestock operators (intermediaries). Violations of the P&S Act by stockyard owners, market agencies, or dealers result in damages which are guaranteed by a mandatory livestock packer, dealer and market agency bond. In 1976, Congress increased financial protection for livestock producers by adding the surety bond requirement. Operators engaged in the following business fall under the regulatory framework of the P&S Act. The USDA offers a good Q&A on these activities:

  • Livestock marketers (meat and poultry)
  • Stockyards, commission firms, and livestock auctions
  • Order buyers and livestock dealers
  • Meat packers, meat brokers, meat wholesalers and distributors
  • Swine contractors and live poultry dealers

Per the USDA portal, "Every dealer, market agency buying on commission and clearing agency must maintain a reasonable livestock packer bond to secure its obligations to livestock sellers. Dealers and market agencies buying on commission and market agencies acting as clearing agencies for others must likewise post a market agency surety bond using the same form (P&SP-2000). The surety bond penalty is based on volume, generally an average of two days business. The minimum packer bond is $10,000. §201.30 provides the statutory formula for determining bond threshold, to wit;

Market agency selling livestock on commission - Divide the dollar value of livestock sold during the preceding business year, or the substantial part of that business year by the actual number of days on which livestock was sold. The divisor (the number of days on which livestock was sold) need not exceed 130. The amount of the market agency surety bond must be the next multiple of $5,000 above the amount determined. When the computation exceeds $50,000, the amount of bond coverage need not exceed $50,000 plus 10 percent of the excess over $50,000, raised to the next $5,000 multiple.

Market agency buying on commission or dealer - Based on the average amount of livestock purchased by the dealer or market agency during a period equivalent to two business days. Divide the total dollar value of livestock purchased during the preceding business year, or substantial part of that business year by one-half the number of days on which business was conducted. The number of days in any business yea need not exceed 260. The divisor (one-half the number of days on which business was conducted) shall not exceed 130. The livestock dealer bond must be the next multiple of $5,000 above the amount calculate. When the computation exceeds $75,000, the amount of the surety bond need not exceed $75,000 plus ten percent of the excess over $75,000, raised to the next $5,000 multiple.

Market agency acting as clearing agency - Based on the average amount of livestock purchased by all persons for whom the market agency served as a clearor during a period equivalent to two business days. Divide the total dollar value of livestock purchased during the preceding business year in which the market agency acted as clearing by one-half the number of days on which business was conducted. The number of days in any business year need not exceed 260. The divisor (one-half the number of days on which business was conducted) shall not exceed 130. The amount of clearing agency bond must be the next multiple of $5,000 above the amount so determined. When the computation exceeds $75,000, the amount of bond coverage need not exceed $75,000 plus 10 percent of the excess over $75,000, raised to the next $5,000 multiple.

Packer - Based on the average amount of livestock purchased by the packer during a period equivalent to two business days. Divide the total dollar value of livestock purchased during the preceding business year by one-half the number of days on which business was conducted. The number of days in any business year shall not exceed 260. TThe divisor (one-half the number of days on which business was conducted) shall not exceed 130. The amount of the livestock packer bond must be the next multiple of $5,000.

The livestock packer, dealer and market agency bond is a statutory compliance obligation which contains strict financial guarantee provisions. The bond requirement was enacted to address; a.) slow, insufficient, or non-payment for livestock, meat, or poultry, b.) potential antitrust practices, and/or c.) unfair, deceptive, and fraudulent practices by entities regulated by the P&S Act. The surety issuing stockyard and packer bonds pursuant to the federal code must appear on the United States Treasury Department's circular of surety companies approved for federal obligations. Pursuant to §201.28 Executed duplicates of surety bonds with any endorsements, amendments, riders, indemnity agreements, etc., must be filed with the Regional Supervisor for the region in which the registrant, packer, or person applying for registration resides. If the applicant is a corporation, then where the corporation has its home office. In an operator does not engage in business in his or region of residence then the packer or market agency bond must be filed with the Regional Supervisor for the region in which the "place of business" is located.

The USDA portal provides a helpful page to aid in identifying appropriate regional supervisory offices. Statutory compliance and market conduct matters may be directed to:

Livestock, Meat, & Poultry
USDA, AMS, FTPP
STOP 3601
1400 Independence Ave., SW
Washington, D.C. 20250-3601
1-833-DIAL-PSD 1-833-342-5773 (toll-free)
FAX: 202-205-9237

ADVISORY: The P&S Act authorizes severe penalties for non-compliance with the federal code. Those may include civil penalties up to a maximum of $28,061per violation; $81,633 for violation of poultry payment provisions and prison sentences for DoJ actions.

National surety bond leader, Surety One, Inc., offers knowledge and experience in bond underwriting within the livestock intermediary space. We offer both surety and fidelity bonds needed by USAD regulated operators, livestock trade professionals and market agencies in every state where they are required. Questions about a livestock packer, dealer and market agency surety bond? Call us at (800) 373-2804, email us at Underwriting@SuretyOne.com or click here for live chat.

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