How does a farmer qualify a buyer?

[hobbyfrmr]

Im ruminating about this CGC / Ilta failure.
If Ilta got beat up then who is to say the other pulse buyers are not feeling some difficulty.
How does a farmer/vendor qualify other buyers knowing the CGC is incompetent?
There has to be a mechanism to do a credit check on buyers, the rest if the world does it. Consider buying a car, machine, implement. Its all (OAC) on approved credit.
I have never looked into it for sales in Saskatchewan but the A/R credit check saved me from delivering grain to a BC company who could not afford to pay for it. That would have been disastrous.
Im getting cranky about this, everybody seems to lie all time. Its like the “new” way to live.

[Ache4Acres]

I just had a similar discussion this morning. Because of serious moral decay people can no longer trust each other. Business deals are being paralyzed because of the lack of trust needed to move things forward.

The problem with crooked grain buyers is even if they have the money they will work the system with claims of low grade or weeds or bugs at the delivery point and leave you without grain or money.

The world is a more difficult place than it once was.

I say we bring back wearing top hats as a symbol of a time when a mans word meant the world and where a good deed was rewarded. Cowboys still wear hats and I trust them more than a city slicker banker any day of the week.

[Guest]

the f#$ken a#$holes know everything about us , we aren't allowed to know anything about them
had a grain co rep ask us to sign this europe bullshit thing pertaining to sustainability
it showed we cleared a yardsight 10 years ago , that was ok because it wasn't virgin bush . told him they know too much about me already and wasn't interested
we need a real farmers union , this bullshit that is going on is worse than the way workers first started unionizing years ago
like this mornings newsletter has in , they will soon be sampling our crops with drones as well as watching them all summer
hope ihave the 12 gauge on board if they come checking mine

[macdon02]

Had a conversation with a fellow fluent in bonds, regarding letters of credit extended to govt entities that procure grain shipments, here's what he had to say.....

@James do you know the mechanics of bonds? Im asking because i believe this is tied to trade. When a govt entity buys say a boat load of grain, most of grain in the world is bought by a govt entity or department, a letter of credit is issued to the seller from the buyer. Big IF, if the EM markets can't go to the bond market for the letters of credit to guarantee a shipment of anything, could be iron, grain, copper, etc. Does the imf step in? There's angles of a contraction in credit that have never been spoken about. Incredibly deflationary imo.


His response....



I have experience with international letters of credit issued by private firms and I have experience in trading bonds internationally. However, I have no experience in receiving LOCs from governments. Nevertheless, you have a great question that needs to be answered. Oftentimes banks will require a deposit of the amount of the LOC from companies with a low credit rating before issuing the LOC. However and as you probably know, governments can do anything they want regardless of their credit rating.

As for the IMF stepping in, it is my understanding that any assistance must be applied for by the receiving country and such assistance typically comes paired with draconian terms. This would indicate to me that the IMF could take years to put any loan arrangements in place that would grant relief to any private party holding an LOC. In fact, the IMF might require such LOCs to be defaulted upon before making any loans. Take Argentina for example. The current administration issued billions in Dollar bonds and now is in trouble because their Peso is collapsing. So they simply cannot pay off the increase in debt because their principle and interest have doubled or tripled in terms of dollars. This has created a huge embarrassing issue for the IMF. I doubt they are worried about any LOC’s Argentina has issued to private parties. Here is an interesting article regarding the pickle the IMF is in because of these developments, which MA had warned about:

"It's An Embarrassment": IMF Faces Humiliation, Billions In Losses As Argentina Braces For Next Default On Friday, when CNBC's Steve Liesman was interviewing the IMF's new chief economist, Gita Kopinath, we suggested that he ask what the IMF's plan is for Argentina now that the country was facing what appears yet another bond default.

https://nationandstate.com/2019/08/26/its-an-embarrassment-imf-faces-humiliation-billions-in-losses-as-argentina-braces-for-next-default/

Having said the above, it would be my instinct that any LOC issued directly by an EM government would be the last thing they would honor if they were to get into financial difficulty. Think the current defaults taking place in Puerto Rico. The PR government is taking the position that investors who purchased their bonds have taken advantage of poor PR and therefore, they have no obligation to repay. If they take this attitude with bond holders, I would guess that it would be much easier to take that position on an LOC issued to a private party. I hope that makes sense.

Cheers

Imo the pulse market in general, being that most of the existing markets are in Emerging Market territory is extremely vulnerable to a processor getting lit up and stung by a foreign govt. Im not sure how to limit risk but maybe BDC or Export Canada will know

[hobbyfrmr]

Macdon,
That is interesting thank you for posting it.
My question is geared more about where is a farmer is going to deliver his next btrain of pulses if he can not know whether the company can pay for it or not? How can a farmer do a credit check on any grain buyer?

[macdon02]

Macdon,
That is interesting thank you for posting it.
My question is geared more about where is a farmer is going to deliver his next btrain of pulses if he can not know whether the company can pay for it or not? How can a farmer do a credit check on any grain buyer?

I would start asking a ton of questions to the various govt agencies available, excluding Grain Commission. They'll lie to avoid a panic situation setting in. Ilta was given their license back in an attempt to make the banks whole. They don't give a shit about the farmer.

Edit, not only is there risk through the bond market, Commerzbank and Deutsch are on their death bed, i have no idea which other European banks are at risk of going under, the risk doesn't stop in EU by any means. The inverted yield curve is absolutely hammering bank profits around the world.

[hobbyfrmr]

Macdon,
That is interesting thank you for posting it.
My question is geared more about where is a farmer is going to deliver his next btrain of pulses if he can not know whether the company can pay for it or not? How can a farmer do a credit check on any grain buyer?

Fixing a tractor and still ruminating, I partly answered my question. I remembered a few years ago attending a presentation from farmlead.com. They proactively do quarterly credit verification of all buyers on the platform. If they do not pass the verification they are not allowed to buy grain through farmlead.
This is not a sales pitch, I try to find answers for things I can do personally. It happens I recall this detail and its about the only answer I have at this time.

[macdon02]

If the IMF follows the same process as earlier bank failures, anyone or entity that has cash in the bank, becomes a share holder, which they cannot sell to convert to cash. The account holder takes a haircut and I have absolutely no idea what happens if someone like Glencore gets stung. It will not end well. The bigger risk is in the EM markets sourcing the letters of credit at this time, imo. This is soooo facking far gone beyond driving a tractor these days