What Is a Livestock Dealer Bond?
Entities engaged in buying and selling of livestock across the U.S. need a livestock dealer bond. It’s required before they can obtain a state livestock dealer license and operate in legal compliance with the Packers and Stockyards Act of 1921.
The purpose of this surety bond is to guarantee that dealers will act in accordance with applicable rules, and that livestock producers’ interests will be protected.
The livestock dealer bond functions just like other surety bonds. It represents a three-party contractual agreement. The principal is your livestock dealership that needs to get bonded. The authority that requires the bonding is the obligee, and the surety is the entity that backs your business with the bond.
Questions about Livestock Dealer Bond
Who needs to obtain a livestock dealer bond?
Livestock dealers that may need to post a bond include auction markets, stockyards, buying stations, and concentration points. In practical terms, this means anyone who is in the business of selling, buying, and negotiating deals for livestock. Usually, livestock includes cattle, sheep, swine, horses, mules, llamas, bison, and goats.
Dealers need to file the bond with the U.S. Department of Agriculture’s Grain Inspection, Packers & Stockyards Administration (USDA’s GIPSA). That’s why the bond is sometimes referred to as USDA livestock dealer bond. You can find the bond form here. If the bond amount and conditions match state requirements, dealers don’t need to obtain an additional bond to present to state authorities.
The licensing procedure typically involves both your state authority and the USDA’s GIPSA. You’ll need to inform the federal institution that you would like to get licensed as a livestock dealer, so they can give you the necessary papers. After obtaining the livestock dealer bond, you can continue with your state licensing. In most cases, it involves selecting the license type you need, completing an application form, paying licensing fees, and providing any additional documents required.
How much does a livestock dealer bond cost?
The price of your bond is based on the bond amount you will be required to post by state and federal authorities. Your bond premium, however, is only a percentage of the bond amount you are asked to obtain.
In most cases, the rates are in the range of 1%-5%. Thus, if you have to post a $20,000 bond, your cost will be in the range of $200-$1,000.
The bond rate you’ll have to cover depends on your personal and business finances. The surety you apply with will examine your personal credit score, business finances, and assets and liquidity, to determine how risky it will be to underwrite your bond. If your business profile is stable, you can expect a lower bond price.
Make sure to check out our surety bond cost page for a thorough overview of how your bond cost is formulated.
Can I get bonded with bad credit?
Struggling with your finances? That won’t stop you from getting bonded.
At Lance Surety Bonds, we run our Bad Credit Surety Bonds program to help livestock dealers with low credit scores, tax liens, bankruptcies, or civil judgements obtain the bond they need.
The typical bad credit bonding premiums for livestock dealer bonds are in the range of 5% and 10%. The slightly higher price compensates for the increased risk in bonding. Still, with us you are guaranteed a top rate because of our close partnerships with a number of A-rated, T-listed surety companies. We can shop around for you and offer you the best matching bonding option.
How do I get my livestock dealer bond?
If you’re ready to start the process of obtaining your USDA livestock dealer bond, you can apply online for a free quote. Your exact bond price is available after submitting a full application and attaching all necessary paperwork.
Need more information? Our How to Get Bonded page can help you in getting a full picture of the bonding process.
For any further questions, call us at (877) 514-5146. Lance Surety Bonds’ specialists are here to assist you.
How are bond claims handled for livestock dealer bonds?
Your bond is not insurance for your livestock dealership. Instead, it functions as a layer of protection for farmers whom you work with. If you fail to follow the law, you can get a claim on your bond by an affected party. If it’s proven, you’ll have to reimburse the claimant. Your surety covers the costs at first, but then you’re liable to repay it.
The most common case for getting a claim on your livestock bond is a disagreement over payments with a livestock producer you are working with. Failing to duly cover such payments is a viable cause for a bond claim. Additional situations that can trigger such issues include failing to meet state laws, or engaging in other fraudulent activities that cause losses to farmers or the state.
The seriousness of claims shouldn’t be underestimated. They can hurt your business financially, but also in terms of your reputation. Getting bonded after a proven claim is usually a challenge. That’s why it’s wise to avoid claims as much as possible.