By signing an agreement with future harvest buyer, we ensure that principal plus interest is paid back in the first place and only then the farmer receives remaining amount from the sale of harvest.
To protect against either loss of their crops due to natural disasters, such as hail, rainfall, storm or the loss of revenue due declines in the prices of agricultural commodities.
In many cases farms are transferred from one generation to the next within the same family. Such personal guarantees are much stronger than ones from general SME owners.
Most of farms own other valuable assets such as machinery, agricultural land, buildings etc, which can be used in debt collection.
Companies, which purchase grain, use financial instruments to be protected against financial losses from grain price fluctuations. This is known as “price hedging”.