Early access to Pre-Pay

08 Mar, 2013 01:00 AM
General manager of CBH marketing and trading Jason Craig said overwhelming feedback from growers, advisors and banks persuaded CBH to provide early fund access for its Pre-Pay Advantage product this season.
General manager of CBH marketing and trading Jason Craig said overwhelming feedback from growers, advisors and banks persuaded CBH to provide early fund access for its Pre-Pay Advantage product this season.

CBH will provide early fund access for Pre-Pay Advantage this season in a bid to help growers bolster their business revenue streams.

Historically, the product provided a pre-payment for grain committed to be delivered to any CBH service at harvest and this year application approvals opened on March 5.

General manager of CBH Grain's marketing and trading arm Jason Craig said overwhelming feedback from growers, advisers and banks suggested the March approval of funds to be released mid-season gave farmers confidence there were reliable options still available for competitive pre-harvest cash flow.

And growers didn't necessarily have to turn to the banks.

"This year CBH will again offer growers a competitive interest rate of 7.25 per cent on pre-payment funds," Mr Craig said.

"The product places another tool at the growers' disposal to be able to smooth out their income over the season and give them the flexibility of being able to pick and choose their options."

During the 2013/14 season growers will be able to access the pre-payment for their grain sales as early as July 1 - subject to meeting conditions.

"At harvest growers are then required to sell committed tonnes to CBH to satisfy both their grain tonnage and financial commitment," Mr Craig said.

But Mr Craig shied away from the idea of CBH acting as a creditor or lending facility.

"It's really an advance against a commitment the grower has provided us," he said.

"The grower will commit tonnes to us and we will advance $100 a tonne against the commitment based on yields.

"It's more of a pre-paid facility but of course we also have to be mindful of the grower's credit position."

Mr Craig told Farm Weekly because, in essence, it was growers' capital being outlaid in advance CBH had a responsibility to take a somewhat cautious approach throughout the payment process.

"Our ability to pre-pay funds relies on our ability to borrow from the banks," he said.

"So we're using part of those facilities to be able to provide this pre-paid facility to farmers."

He was also less than forthcoming when asked what kind of repercussions a grower might face if they defaulted on a commitment.

Mr Craig said in this instance CBH generally worked one-on-one with growers who had struggled throughout the season to work out a specified plan of action.

"Our experience during the last few of years has been that the majority of growers who commit tonnes to us can obviously deliver those tonnes because we're very prudent on the yields they estimate," he said.

"The important thing is we're getting a wide range of growers using Pre-Pay Advantage because the product is easy to use, it's not just being used by those who might be struggling on-farm throughout the growing season."

Mr Craig told Farm Weekly the Pre-Pay Advantage product wasn't a new type of arrangement and was currently being used in a number of similar situations around the world.

"All we've done is changed it slightly this year by bringing the pre-approval and payment times forward by a month to coincide with the 2013/14 crop going into the ground," he said.

"We've done that on the basis of growers strongly supporting the product in previous seasons and asking whether they might possibly gain access to the funds a few weeks earlier than usual.

"It all helps to give our State's growers a little more confidence after a tough year."

p CBH also told Farm Weekly strong support for the Pre-Pay Advantage product had been shown in the past with more than $35 million provided in pre-harvest funds to WA grain growers last season. For more information growers should contact their local CBH business relationship manager.



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