Stemming the bleeding

It's critical we have smaller grain buyers operating and for growers to have confidence in them

THE grains sector faces a delicate balancing act in light of the ongoing issue of grain companies going under, leaving growers as unsecured creditors.

Growers value the added competition and diversity a wide field of buyers bring, but on the flip side, the insolvencies have almost exclusively come from the ranks of small to medium grain buying businesses.

This leads to the natural withdrawal of growers to the safe havens of the major international buyers with their massive balance sheets, but by doing this they risk lessening competition within the marketplace and some sort of oligarchy of the majors emerging.

So what can be done to stop growers being stuck with unpaid debts?

It’s a complex situation, with no one answer.

There have been moves through government initiatives such as the Personal Property Security Register (PPSR).

While this appears to have merit in the space of warehoused grain in a failed bulk handling system, it has not worked as well in the case of purchased grain that has not yet been paid for, with many major marketers saying they need grain on their books as collateral.

Debtor insurance is one angle organisations such as Grain Trade Australia are eager to pursue and it certainly has merit as a relatively cheap way of ensuring growers will at least receive the majority of the balance they are owed, however some growers suggest current products do not offer enough back for the premiums paid.

Another suggestion many want to see get traction within the trade is tighter payment terms, saying with today’s technology it would be easy for buyers to operate on seven day terms, rather than the 28 days that is standard practice, but which has its basis in the years where data was transferred by post.

This would mean less chance for serious tonnages to be purchased when a company is on the brink of collapse. It obviously won’t stop companies failing, and it won’t stop farmers being left holding the can, but it will limit the damage in a meaningful way.

Trading licences have also been raised as a possible solution. It’s hard to see how they will stop all but the worst companies from attracting grain as a big issue in this problem has been the difficulties in identifying warning signals with at-risk businesses.

This can be evidenced by the hefty amounts owed to the banks, with all their due diligence processes, who have seen fit to loan these businesses money.

There’s no quick fix with this issue, but for a vibrant grains industry it's critical we can have smaller grain buyers operating and for growers to be able to deal with them with confidence.

FarmOnline
Gregor Heard

Gregor Heard

is the national grains writer for Fairfax Agricultural Media
A matter of opinionA selection of editorials from around the Fairfax Agricultural Media group covering the issues of the week.

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