Producers Livestock Marketing Association, (Producers) proposes to enter into a livestock feeding program with feeder/grazer's. Under the terms of the program, Producers will place livestock owned by Producers with selected feeder/grazer's. A feeding contract/agreement will be entered into between Producers and the feeder/grazer. The feeder/grazer will be responsible for feeding the livestock, and for any profit or losses incurred. Producers shall receive the normal handling charge received for the purchase and sale of livestock and shall receive interest (which includes the cost of capital) charged at a simple interest rate. This interest shall be accrued and charged when the livestock are sold.
Under this livestock feeding program, FEEDER/GRAZER WILL RECEIVE ALL OF THE "NET" PROFITS FROM THEIR TOTAL FEEDING AND GRAZING COMMITMENT WITH PRODUCERS LIVESTOCK, but will encounter the same risk as feeding his own livestock and will be responsible for the actual costs incurred by Producers, including but not limited to livestock, freight, feed, veterinarian, consultation charges, market conditions, handling charges and interest.
Producers reserves the right to select participants in the program based on information provided by the potential feeder/grazer and the criteria described below. These criterion are set forth as guidelines only. The discretion of the feeding and grazing committee established by Producers will govern final selection.
1. Potential feeder/grazer will already be in business with experience in raising livestock. This will be verified by the feeding and grazing committee.
2. Potential feeder/grazer must provide recent financial statements and tax returns for review and consideration.
3. Potential feeder/grazer must demonstrate a cash flow which allows the livestock to be fed for the specified feeding period without advances for day to day expenses.
4. Potential feeder/grazer gives permission for a credit report to be obtained by Producers Livestock. This credit report shall be used for the sole purpose of determining eligibility for participation in the feeding and grazing program.
5. Potential feeder/grazer agrees to enter into a written contract/ agreement with Producers Livestock outlining his duties, responsibilities and liabilities.
Selection of Livestock
The selection of livestock will utilize a four step process.
Step 1. Livestock will be placed only in lots that have adequate feed, water and equipment to care for said livestock for the specified feeding period.
Step 2. Livestock will be placed in lots approved by the feeding and grazing committee.
Step 3. All livestock will be approved, purchased and sold by an authorized agent of Producers Livestock unless otherwise arranged and agreed to by both parties.
Step 4. Handling charges will be received by Producers Livestock on both the purchase and sale of the livestock.
Program Implementation, Guidelines, Internal Controls
After selection and approval, the applicant will be required to enter into several written documents. These documents include but are not limited to: 1) a written contract/agreement, 2) a creditor's release or feed release, 3) a landlord waiver and consent for leased or rented property, 4) a BSE/drug residue certificate, 5) an informational financing statement, commonly known as a UCC-1 or EFS. This document puts the public on notice that the livestock are the property of Producers Livestock Marketing Association.
Additionally, the participants in the program will be governed by the following guidelines:
1. All livestock will be branded with a brand that is registered to or leased by Producers Livestock Marketing Association upon arrival to the feeding or grazing location.
2. The feeder/grazer will be expected to accept the livestock, based on price, condition, weight, health, etc., as is commonly accepted under a normal sale.
3. Producers reserves the right to recommend the appropriate feeding program and, if necessary, to appoint a consultant to advise on the feeding program or health treatment procedures in the case of excessive illness, death loss or poor rate of gain as determined by a Producer's agent. In such a case, the full cost of the services provided may be added to the cost of the livestock and deducted at the time the livestock are sold.
4. If cattle are placed in a commercial feedlot not owned by the feeder/grazer, an additional feedlot agreement must be completed. An initial down payment of at least $150.00 per head is required. At all times, feeder/grazer shall maintain a margin account over and above the accruing cost of cattle and such other feed costs and related costs. If feeder/grazer should prepay any amounts for feed, satisfactory evidence of such payments shall be provided to Producers.
5. Upon request, the feeder/grazer will be expected to return a signed inventory report to Producer's corporate office at 230 West Center, North Salt Lake, Utah 84054. A copy of this report is included with this booklet. A representative of Producers Livestock Marketing Association will inspect the livestock whenever deemed necessary.
6. Producers will include in the cost of the program a liability insurance to guard against loss from fire, theft or other casualty. The deductible on the liability insurance program is $10,000. Cause of death must be determined by a veterinarian. A current location for the livestock must be provided for the coverage to be in effect.
7. The feeder/grazer is encouraged to participate in a risk management program provided by Producers Livestock Commodity Marketing, or such other licensed commodity brokerage as approved by Producers. At the sole discretion of Producers Livestock Marketing Association, a minimum position (i.e. hedge, put-option, etc.) may be placed. Feeder/grazer shall also have the right, on his own accord, to participate in a risk management program. Producers advises that the risk in trading commodity futures can be substantial. Feeder/grazer should, therefore, carefully consider prior to entering the program whether such trading is suitable for feeder/grazer. To the extent feeder/grazer requests funds from Producers to participate in a risk management program, or to the extent Producers shall purchase a minimum position, the cost of funds including accrued interest shall be added to the total cost of the livestock and shall be deducted from the net sale as provided in this agreement.
8. In the event that the feeder/grazer does not use this program over a six-month period, approval will be withdrawn.
Handling Charges & Fees
Producers shall be entitled to the following fees and handling charges:
1. For livestock purchased out of a Producers auction facility the handling charge will be $.50 per cwt. For livestock purchased and/or sold involving any other transaction the handling charge will be $1.00 per cwt. Livestock sold through an auction facility or video sales, the charge will be determined by the established tariff.
2. Interest charges will be calculated as follows:
Total Cost times Interest Rate* times Number of Days divided by 360.
*Interest rate will be fixed at the beginning of each lot. The interest rate shall be determined by the base rate charged by PLMA's lender plus 200 basis points or 2.0%. There may be more than one lot under each program. Total cost includes cost of livestock plus all trucking, miscellaneous charges, purchase handling charges, etc., and all other costs and fees as set forth in this agreement.
The feeder/grazer may terminate the feeding arrangement at any time by giving thirty (30) days written notice and paying Producers for all costs incurred to the date of termination.
In the event of termination, the full and normal fees and handling charges that Producers normally receives for the purchase and sale of livestock will be charged. Also charged against the livestock will be the interest charges.
Producers further reserves the right to terminate the feeding program at any time if it is determined by Producers that their equity is in jeopardy.
Feeder/Grazer Risks and Benefits
THIS RISK THE FEEDER/GRAZER WOULD ENCOUNTER IS THE SAME AS FEEDING HIS OWN LIVESTOCK. All death loss and related sickness are the responsibility of the feeder/grazer. Consequently, the feeder/grazer must indemnify Producers in an amount equal to the full replacement value of the livestock, for any loss, including death loss, arising from fire, theft, sickness, act of God, or any other risks and casualties normally covered by a broad farm insurance policy.
The feeder/grazer must supply feed, supplement, medication, veterinarian and consultation fees, trucking, liability insurance, and any other miscellaneous costs incurred in the normal course of feeding livestock. The potential benefit to the feeder/grazer is the ability to profit from the overall gain of the livestock. Unlike other feeding contracts, which are based on a per pound of gain formula, the program provides that the FEEDER/GRAZER CAN RECEIVE ALL OF THE "NET" PROFIT FROM THE SALE.
The feeder/grazer also has the option of purchasing Producers' interest at any time deemed beneficial to the feeder/grazer by giving Producers thirty (30) days notice, and paying Producers for all costs incurred to date.
* The information provided on this page shall in no way constitute an agreement or a contract with Producers. Producers reserves the right to make changes to the program at any time and this page may not reflect those changes. For the most current information available, please contact your local branch or fill out the form below.
CLICK HERE TO REQUEST MORE INFORMATION ON OUR FEEDING & GRAZING PROGRAM
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