One of the nation's largest cattle brokerages is under investigation after federal regulators said the Indiana company left ranchers nationwide hanging for as much as $130 million, U.S. Department of Agriculture officials said Thursday.
Eastern Livestock Co. wrote checks totaling about $81 million to buy cattle this month that have been returned for insufficient funds, according to the USDA. But the company may owe more than 700 ranchers across the Midwest, South and West a total of $130 million, agency spokesman Jim Brownlee said.
Investigators from USDA's Grain, Inspection, Packers and Stockyards Administration worked for several days at the company's headquarters in New Albany, about 115 miles south of Indianapolis, Brownlee said. The U.S. Department of Justice also is involved.
It wasn't immediately clear how ranchers already hurting from rising costs and bad weather might get their money back. The company's accounts were frozen last week by a judge in Ohio, according to published reports, and USDA records show the company is bonded for only $875,000.
A man who answered the phone at Eastern's headquarters Thursday said the company had no comment. Eastern does business with ranchers in 30 states.
"We're devastated," said 64-year-old Wanda Beyer of Louisville, Ky., who owns a 400-acre cattle farm with her brothers in south-central Kentucky. They received a bad check for $15,000 for 32 cattle that ended up on a feeder lot in Kansas.
Beyer said she and her brothers feel as if their cattle were stolen, and "$15,000 to us is like millions." She said her brothers wrote $6,000 in checks to pay bills without knowing Eastern's check was no good.
The bounced checks mean financial hardship for many ranchers and could push some toward bankruptcy, said Jim Collins, director of industry relations with the Juliet, Ga.,-based Southeast Livestock Network.
Fall is a particularly busy time for ranchers to sell calves, and ranchers already were struggling with rising feed costs, drought and adverse weather, he said.
Eastern, which has stockyards in 11 states, mainly bought calves throughout the South and sold them to feed lots in big cattle states including Texas and Oklahoma where they are fattened for slaughter, said Ross Wilson, CEO of the Texas Cattle Feeders Association.
"The producers most financially damaged by the Eastern situation are those producers who have sold and shipped their cattle and have not yet received their payment. The odds are not looking good that there will be much money to go around to pay for those cattle," he said.
But the company's woes also could affect feeders who buy cattle from Eastern, stockyards that pay ranchers for cattle and then seek payment from Eastern, marketing agents who auction livestock by phone, and even truckers who get paid to haul cattle from stockyards to feed lots, Collins said.
Feeders who buy cattle raised by ranchers left hanging by Eastern "may have a financial lien situation and confusion as to who they should write the check to. And some of the confusion unfortunately will be settled in the courthouse," Wilson said.
The USDA has advised ranchers who did business with Eastern how to file a claim against the company's bond. But at this point, all they can do is file a claim "and get in line," Collins said.