Details may be off a little, but the heart is right.
After the disastrous market of 1973-75, I was broke, like everyone else. One day, I got to noticing that spring yearlings were not trading and the spring feeder months were at a considerable premium to the cash bids. I gathered what equity I had and talked to my banker about allowing me to basis trade feeders. Cattle traders were not looked on favorably, but he had some faith in me. I started trading.
Don Powell, an order buyer from Canadian, and I worked out a partnership under which he would find the cattle and I would put up the money. Before long we had a good number of cattle put together. I was also doing some business with other order buyers. We purchased most of the cattle on the first turn of cattle at $7 under the board and we sold them during a break in feeder cattle prices at event to $3 under the board. What made it possible was that everyone had been hurt badly enough that no one wanted to step out and buy cattle at high prices. At lower prices, people would step in and take a cash position. We made money by buying high and selling low!
In early 1977, I was at Texas Beef Producers and noticed that the feeder board was up a half a dollar. It had been up the day before and I mentioned to Terry Scott that I was hunting yearlings. He told me about a string he had been offered that morning. There were 500 steers to come immediately, 700 Georgia heifers to come in May and 1,700 steers pastured near Spearman to come the next October. The basis was very attractive and I asked who had offered them. He gave me the name of a trader from Tennessee and I backed off. The trader had sold us a string of heifers that were supposed to be near Clayton, NM, the year before. There was an up market and we received cattle from Tucumcari, NM. We received 10% fewer cattle that we had contracted and the owner of the cattle said that was all he had at that location. The trader told me that he had contracted over 300,000 cattle that fall and all of them were 10% short. I figured out that, with the market increase, he had been shorted $21 million. I told him he must be really rich to be able to take a loss like that and this made him mad.
Anyway, I told Terry that I didn't want to do any more business with the trader and drove back to Amarillo. By the time I arrived back to Amarillo, the market was locked up the limit and it looked as if it would be the next day. I called Don Powell and asked him if he knew of any cattle we could buy. He told me about a set and I told him about the Tennessee trader cattle. Don knew of the trader’s reputation, but he told me that he could sell the cattle that came immediately for a good profit to Hitch. We knew we could hedge the other cattle. Greed got the best of us and we decided I should call about the cattle.
When I called, the trader assured me that he wanted to make good our last bad deal. He said that he had seen all of the cattle personally and that they were the quality described. In addition, he guaranteed that we would get our count. I suckered for the cattle.
I called Powell and told him I had purchased the cattle. He wanted half of the deal and I said fine. He wanted to immediately turn the first cattle to Hitch, but I told him that the market was going up and I wanted to spec on these cattle. The next day, the market was again up the limit. Powell called and said that Hitch had called him and they wanted the steers. The May Georgia heifers did not interest them. I suggest that we wait another day. Powell reminded me that we could make great money by selling them immediately, but I held out
The next day the market was up a half a dollar. Powell and I talked at the open and decided how to price the cattle. We decided to make a buyer take all of them or none. Powell called Hitch and they agreed to give our price on the steers, but they didn’t want the heifers. He called back and I wanted to try a couple of folks I could sell to. I talked to them and everyone was leery of the heifers, even though I had dropped the price on them a little and increased the price on the steers. One of the potential buyers sounded as if he might do the deal, but wanted to know more about the heifers.
I called the Tennessee trader to ask about the heifers. His first words were, “Jay, you really stole those heifers. I just talked to someone who was hunting for some just like them. I could get $2 over what you gave for them.” Considering what we gave, this meant I paid way too much when we bought them, but I said, “Great. I tell you what, you sell them to him and I will split the $2 with you.” He was surprised and said he would see if he could get it done and get back with me. I told him I needed to know immediately. Surprisingly, he called me right back and repurchased the cattle from me.
I called Powell and told him I had turned the heifers back to the man we purchased them from. We agreed that Hitch should have first shot at the steers and priced them to Hitch and sold them. I felt rich.
The first group of cattle came in three deliveries. The day the first delivery was supposed to be in, I was a nervous wreck. The market had continued to go up and I worried that the trader would screw us around. Powell went up to Guymon to see the cattle and I was greatly relieved when he called and told me that the cattle were as described. The second delivery, also, were as described and this was all but one load of the 500 steers.
A few days later, Powell called me and told me we had a problem. The last load had come in and they were plain steers and bulls. I told him this couldn’t be and they must be someone else’s cattle. He asked me to call the trader. I did and he finally got on the phone. I explained the situation and he said, “Jay, they came up short on the contract. I told you that I would guarantee the count and we bought the cattle at the auction.”
I answered, “That’s fine, but we contracted #1 steers. These were steers and bulls and were plain.”
He answered, “I bought what I could at the price. The market has gone up.” We argued, but he would not give. I was sick. I turned down the dogs he had sent and hung up. Talking to Powell, we decided that we would deliver a load of steers we had contracted and had not resold to make up for the load we were short to Hitch. We lost enough money on that one load to almost offset what we had made on the rest of the first delivery. We had a case to sue the trader, but we were worried that, if we did, it might foul up our fall delivery. We knew the man at Sprearman and felt we would not have a problem with the cattle. I called that man and he said he had all of the cattle and they were #1 cattle. Powell and I decided not to sue, and to be satisfied with what we would make on the heifers and the fall steers.
May came and went and I did not hear from the trader. I called several times and he did not return my calls. I left messages that I had not received the profit. Powell and I discussed what to do and finally decided that we should have a lawyer write him. If we let him screw us again, we were worried that he might try on the fall trade and we could not afford making it good.
I called Bobby Moore and explained that the trader owed me money from the heifers. We decided that it would be best to explain that he also owed us for the load he did not deliver on the first batch of steers and for the heifers from the year before. Bobby wrote a letter.
A couple of weeks later Bobby called me and said that the trader’s in house lawyer had called him up (any cattleman who has an in house lawyer is of questionable integrity). Bobby said, “Jay, you didn’t tell me that he is claiming you misrepresented the cattle.” I asked him what he meant and he said, “His lawyer said that the fellow they sold them too deducted money because they weren’t as described. He said he would pay you if he collected from the buyer.” I almost died. I explained that I bought the cattle over the phone from the trader and resold them back to the same trader on the phone. I sold them on his description and he was claiming I misrepresented them! It was the height of gall.
My lawyer thought the situation was as ridiculous as I did and went back to them. We ended up accepting half of what he owed us for the heifers and getting his contract on the Spearman cattle signed directly over to us. We wouldn’t have settled except his lawyer started to tie up the Spearman deal and our lawyer pointed out that, while we would eventually win, it would not get settled before the fall cattle were delivered.
The Spearman deal went well and we were relieved to be free of the trader. Powell and I both agreed that it was our fault for trading with a man we knew had a bad reputation. I heard a few years later that the trader went out of business and had problems with the law. I ended up with a little profit, a great story and the knowledge that you can't deal with someone you can't trust.
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