What is an agricultural bond?
An agricultural packers bond (also called an agricultural bond or agricultural packers and stockyards bond) protects the federal government and your state by ensuring your ag business follows the rules outlined in the Packers and Stockyards Act.
This bond provides financial protection by guaranteeing payment up to your bond limits if your agricultural business fails to meet its obligations for covered activities (outlined below).
- Packer: If your average annual livestock purchases exceed $500,000
- Market agency: If you sell livestock on commission
- Market agency: If you buy on commission
- Livestock dealer
- Market agency: if you operate as a clearing agency
In short, if you work as an agricultural packer, dealer, or market agency, you may need to obtain this license and permit bond to comply with federal and state regulations.
Get Your Agricultural Packers Bond:
- An agricultural packers bond protects the federal government and your state by ensuring your business abides by the Packers and Stockyards Act.
- You may be required to obtain this bond as part of the licensing process in your state if you want to operate as an agricultural dealer, market agency, or packer.
- These bonds typically cost anywhere from 1-10% of the bond requirement.
What is the Packers and Stockyards Act?
According to the U.S. Department of Agriculture, the Packers and Stockyards Act (P&S Act) exists to:
- Assure fair competition and fair trade practices
- Safeguard farmers and ranchers
- Protect consumers
- Protect members of the meat, poultry, and livestock industries from deceptive, unfair, monopolistic, and unjustly discriminatory practices
Farmers, ranchers, other producers, consumers, and industry members are encouraged to report any of the following incidents to the USDA.
- Slow, insufficient, or non-payment for meat, poultry, or livestock
- Potential antitrust practices
- Unfair, fraudulent, or deceptive practices by any entity subject to the P&S Act
How do agricultural bonds work?
An agricultural surety bond is a contract involving three parties:
- Principal: Your agricultural business that needs the bond
- Obligee: The federal or state governing authority that requires the bond
- Surety: The organization that issues the bond
You may be required to obtain a bond as part of the licensing process in your state if you want to operate as an agricultural dealer, market agency, or packer. Depending on your state, you may have both federal and state bonding requirements. Other requirements may depend on your type of business. The minimum bond requirement is $10,000.
Like other types of surety bonds, the cost of your ag bond may depend on several different factors:
- The total bond amount required by the state or federal government
- Your business history and personal financial information
- Your credit score
Agricultural businesses may pay between 1-10% of the total bond amount. So, if you need a $20,000 bond, you could pay a premium ranging anywhere from $200 to $2,000. Generally, the better your credit history, the lower your premium will be. If you have bad credit, you may still be able to obtain the surety bond you need.
If your ag business fails to comply with requirements or follow state and federal laws, your customers (often buyers or producers) may file a claim against your bond. Your surety may investigate the claim to determine its validity. If valid, the claimant may receive compensation up to the total amount of your bond (penal sum). Your business must then repay the surety for the same amount.
To avoid this headache, which may lead to financial turmoil for your business, try to avoid any scenarios that may lead to claims. Following all rules and regulations for your state and industry and responding quickly and directly to concerns that arise may help you avoid unnecessary claims.
Get an Agricultural Packers Bond in Your State
To find the surety bond you need, simply fill out our online application. It’s quick and easy, and we can often process bonds instantly on our all-digital platform. Our system is the fastest and most secure way to get bonded.
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.