FARM leaders have warned growers not to become complacent about managing their counterparty risk.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
The reminder comes following grower lobby groups being contacted over the past few months by growers concerned at significantly late payments from buyers.
Grain trader insolvencies hit the headlines in 2015, with a string of high profile cases of businesses going bust, owing growers millions of dollars.
Those in charge at farmer groups have urged farmers to continue thinking of minimizing their exposure when making marketing decisions.
“Unfortunately there are some reports starting to come in of payments being delayed substantially, which is one of the classic red flag signs when assessing the ability of your buyer to pay,” said Grain Producers Australia chairman Andrew Weidemann.
“If you start to notice irregularities in payments, if they start to drop behind then you need to think very carefully before making more sales with that buyer,” Mr Weidemann said.
He said the industry had transitioned over the past couple of years to generally shorter payment terms, due to both grower demand and improved technology.
“It has been something that really aids growers in keeping their exposure to risk down, if you have a contract with tighter payment terms you are aware much quicker that there may be issues and that in turn means you can limit your exposure to that particularly buyer.”
David Jochinke, president of the Victorian Farmers Federation (VFF) said his organisation remained vigilant against the risk of grain trader insolvencies.
“We encourage our members to report anything out of the ordinary in terms of payment, it helps us get a better picture of where issues are cropping up.
“We are also happy to give advice about the best means to manage that counterparty risk, things like spreading your sales across a number of buyers and being aware of the warning signals like slow payment.”
“It is not always an easy matter, in some of the smaller commodities there are not a wide range of buyers but just keep the risk factor in mind, particularly if you are confronted with a new buyer offering a price way above the market.
“History would show if something looks too good to be true, it probably is.”
Gregor Heard
Gregor Heard is ACM's national grains industry reporter, based in Horsham, Victoria. He has a wealth of knowledge surrounding the cropping sector through his 15 years in the role. Prior to that he was with the Fairfax network as a reporter with Stock & Land. Some of the major issues he has reported on during his time with the company include the deregulation of the export wheat market, the introduction of genetically modified crops and the fight to protect growers better from grain trader insolvencies. Still involved with the family farm he is passionate about rural Australia and its people and hopes to use his role to act as an advocate for those involved in the grain sector.
Gregor Heard is ACM's national grains industry reporter, based in Horsham, Victoria. He has a wealth of knowledge surrounding the cropping sector through his 15 years in the role. Prior to that he was with the Fairfax network as a reporter with Stock & Land. Some of the major issues he has reported on during his time with the company include the deregulation of the export wheat market, the introduction of genetically modified crops and the fight to protect growers better from grain trader insolvencies. Still involved with the family farm he is passionate about rural Australia and its people and hopes to use his role to act as an advocate for those involved in the grain sector.
