We are promoting direct-sales channels for specialty-crops, not only because they fetch higher prices in global markets but also we are more competitive in growing them for a variety reasons -- agronomy knowledge to specialize, advanced farming technology, and favorable soil-climate conditions. If this shift could be achieved, producers would be getting a chance to earn higher margins, thus better returns on investment. But there are certain market-risks that can not be overlooked; we try to bring attention to these risks as part of our facilitation and support efforts.
Currently producers grow mostly staple-crops that they sell to large grain companies, custodians of the bulk-system, known for honoring contracts and paying promptly. Direct-sales involve specialty-crops sold to a broader audience, carrying higher trade-risks; naturally, more attention has to be paid to the credit-worthiness of the buyers. Since arbitration or litigation does not provide practical safeguards globally there should be less reliance on contract commitments. Pre-shipment payments (cash or LOC) should be standard practice, even then backed up by export-insurance.
Also, there are further risks behind specialty-grains grown to buyer-specifications under contract (or standing orders) -- bearing in mind that there is an order-to-delivery lag in this business, a whole crop year or more. Contracts should be tied to down-payments but even then a lot can happen in a year; there should be contingency plans to sell to others. In this vein, producers should avoid highly “exotic” crop-orders, instead try to focus on more established specialty-crop domains where alternative buyers can be found in case contract-orders falter for unforeseen reasons.
At the end of the day, trade-risks cannot be avoided, only managed or mitigated -- after all, specialization is a strategy to increase margins with inherent risk-reward trade-offs. As a platform set up to facilitate crop-specialization, we are committed to providing whatever back-up support we can to protect producer-interests. To that end, we provide extensive global market research, not just crop-markets but also downstream supply-chains, as well as due diligence into prospective buyers. Also, we play an advocacy role in expanding the net of available export-insurance options.
In an environment geared to bulk-trades, it is difficult to get export-insurance for direct-sales. We are well aware of the difficulties specialty-crop exporters face in this regard, thus committed to levelling the playing-field for individual producers.
Given the limited scope of direct-sales it is not surprising that trade-finance channels are as limited as they are, but as volumes pickup more attention will be paid to their development -- trends we will follow closely, and try to support and facilitate.
An important part of our mission is to do everything we can to mitigate trade-risks through our market-research and due-diligence efforts. But there is much more that can be done to support producers through both private and public channels.