{"id":13285,"date":"2014-12-11T00:00:00","date_gmt":"2014-12-10T11:00:00","guid":{"rendered":"https:\/\/www.farmersweekly.co.nz\/aussie-merchants-of-gloom\/"},"modified":"2014-12-11T00:00:00","modified_gmt":"2014-12-10T11:00:00","slug":"aussie-merchants-of-gloom","status":"publish","type":"post","link":"https:\/\/www.farmersweekly.co.nz\/news\/aussie-merchants-of-gloom\/","title":{"rendered":"Aussie merchants of gloom"},"content":{"rendered":"Reading Time: <\/span> 2<\/span> minutes<\/span><\/span>

To help ebb these losses, GrainGrowers\u00a0has developed a guide to help growers\u00a0manage counterparty risk.\u00a0Counterparty risks arise from the\u00a0buyer, or other party, failing to meet their\u00a0contractual obligations.<\/p>\n

This could include becoming insolvent\u00a0and failing to pay the agreed price for\u00a0grain, refusing to take delivery of grain,\u00a0or to meet other obligations within the\u00a0time frame required under contract.<\/p>\n

Unexpected price movements in the\u00a0grain market are another risk for growers.<\/p>\n

They can manage this risk by shifting it\u00a0to \u2013 or sharing it with \u2013 others through\u00a0cash or forward contracts, participating in\u00a0futures and options markets, or pooling\u00a0and insurance.<\/p>\n

According to GrainGrowers, insurance\u00a0only offers effective protection if the\u00a0insurer is solvent, while cash or forward\u00a0contracts only mitigate risk to the extent\u00a0that the contract is enforceable and the\u00a0buyer is able to pay.<\/p>\n

GrainGrowers said a range of Australian\u00a0traders \u2013 including LGL, One World,\u00a0Convector, Sapphire, Midwest Milling\u00a0and Meenban Stockfeed \u2013 have become\u00a0insolvent.<\/p>\n

Reducing counterparty risk in grain\u00a0contracts is a practical guide to managing\u00a0counterparty risks for grain producers\u00a0dealing with traders or buyers.\u00a0<\/p>\n

While the guide is for Australian\u00a0growers, some points may be of interest\u00a0to New Zealand producers. It includes\u00a0information on:<\/p>\n

    \n
  • negotiating contracts<\/li>\n
  • terms and conditions<\/li>\n
  • ownership and passing of title<\/li>\n
  • personal property securities register\u00a0(PPSR)<\/li>\n
  • payment terms and timings<\/li>\n
  • due diligence<\/li>\n
  • insurance, and<\/li>\n
  • dispute resolution.<\/li>\n<\/ul>\n

    When negotiating contracts, the guide\u00a0advises growers to be clear about their\u00a0intentions, obtain terms and conditions\u00a0prior to any agreement and diarise\u00a0negotiations.<\/p>\n

    Review all terms and conditions and\u00a0remember terms can be negotiated.\u00a0Ensure that all parties initial all deletions\u00a0and receive copies of the final agreement.<\/p>\n

    The guide urges growers to include a\u00a0clause for recovery of funds or grain if the\u00a0contract is breached.<\/p>\n

    Growers should register their interests\u00a0on the PPSR. Ensure no other party has\u00a0interest in your grain and be aware sellers\u00a0still have a security interest in goods that\u00a0become an unidentifiable part of a larger\u00a0product or mass.<\/p>\n

    Payment terms should be short. Always\u00a0stipulate a payment day and include a\u00a0clause for interest payable beyond the\u00a0due date.<\/p>\n

    Include a clause in the contract\u00a0whereby the seller is not obliged to\u00a0deliver grain to a buyer with a debt\u00a0already outstanding to that grower.\u00a0<\/p>\n

    Conduct a due diligence investigation\u00a0with each counterparty you wish to\u00a0enter into contract with. Growers\u00a0should monitor the performance of the\u00a0counterparty throughout the contract\u00a0period.<\/p>\n

    Seller\u2019s insurance can limit the impact\u00a0of buyer insolvency. Consider using\u00a0third-party experts to review terms and\u00a0conditions and selling grain to multiple\u00a0buyers to spread risk.<\/p>\n

    Trading up<\/strong><\/h2>\n

    Industry body GrainGrowers has indicated that many Australian grain producers feel the trading environment needs improvement.<\/p>\n

    GrainGrowers will soon address issues of: the potential need to license grain buyers, introduction of buyers insurance and the Grain Trade Australia arbitration process.<\/p>\n","protected":false},"excerpt":{"rendered":"Australian grain producers are suffering\u00a0huge financial losses because of trader\u00a0insolvencies and inadequate contract\u00a0agreements.\nAccording to industry body\u00a0GrainGrowers, at least six Australian\u00a0trading companies became insolvent\u00a0during the past two years. This, combined\u00a0with grain growers entering contracts not\u00a0adequately protecting their ownership\u00a0rights, has cost them almost $45 million.\n\nThe complete GrainGrowers guide is\u00a0available here.\n\n","protected":false},"author":33,"featured_media":13286,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_FSMCFIC_featured_image_caption":"","_FSMCFIC_featured_image_nocaption":"","_FSMCFIC_featured_image_hide":"","footnotes":""},"categories":[3],"tags":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t