WHILE the Victorian Farmers Federation (VFF) is no closer to its goal of implementing a grain trade licensing system and an associated grain trade guarantee fund, acting as a form of credit insurance against trader insolvencies, grains group president at the VFF Brett Hosking says a silver lining has emerged.
“We’ve been really pleased to see a number of grain buyers reduce their payment terms, which cuts the risk of growers being repeatedly exposed to insolvent grain companies, and the feedback we are getting is that is because of farmer pressure to improve payment security,”Mr Hosking said.
Earlier this month, grain buyer Riverina Australia, a subsidiary of the Mitsubishi Corporation, was the latest business to announce shorter payment terms. Grains manager at Riverina Australia Jon Mulally said the decision to move to seven days end-of-week payment terms would mean growers could feel more secure as they got paid quicker.
Earlier in the year, Glencore Australia moved from 30-day payment terms to 12, while Emerald Grain has moved to 14-day terms.
Mr Hosking said cutting the lag time between signing over title of grain and payment would mean growers would notice quicker if they were not paid, meaning there was less likelihood of continuing to sell to a company that may be at risk of going under.
“It’s not the answer to the problem of farmers being left holding the can as unsecured creditors when a company becomes insolvent, but it is a helpful step.”
He said the VFF would continue to lobby for its licensing scheme and insurance fund, but acknowledged this would take more time.
Grain Trade Australia (GTA) made a recent submission into the proposals, saying a licensing scheme would not reduce the likelihood of insolvencies while it would increase costs.
It said growers would generally see similar signs of commercial viability via GTA’s own code of conduct.
In regards to the grain trade guarantee fund, GTA said there were already a number of credit insurance products on the market.
It said a compulsory model would create another levy for producers, in effect seeing those who managed their counterparty risk effectively hit with another impost.
Farmonline
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