Pre-Paid accounts

[ABfarm]

Had a good friend call me from the Leduc area with some disturbing news yesterday. The Independent he was dealing with recently sold to another Independent. They changed the name and everything seemed good to go. He got a call from a receiver yesterday morning that his pre-paid account would not be honored for this spring, the product was not available and he would be added to the list of creditors.

I dont know exactly what happened of course, but it sounds like the Independent who purchased the location backed out of the deal and the old ownership group could not sustain the business and it went into bankruptcy.

So my friend is out $120,000 he thought he had for pre-paid accounts and now he has canola sitting in bins, is out the $120,000 and has to scramble to try and find product to put a crop in.

Got me thinking, really it is almost a hand shake kind of agreement when we hand over all this money. What kind of recourse does a guy really have? Im sure once the bankruptcy stuff is sorted out there wont be any money left for the farmers....I couldnt take a hit like that. This is awful, I feel so badly for those effected.

[Herc]

If I don’t have the product, they don’t have my money.....

That would be a tad bit stressful if I were in his shoes.

[Taiga]

If I don’t have the product, they don’t have my money.....

That would be a tad bit stressful if I were in his shoes.

I have never and would never do a prepay account. For this reason. I also would never ask my clients to prepay in the operation of my businesses. I feel bad for your friend.

[Guest]

Had a good friend call me from the Leduc area with some disturbing news yesterday. The Independent he was dealing with recently sold to another Independent. They changed the name and everything seemed good to go. He got a call from a receiver yesterday morning that his pre-paid account would not be honored for this spring, the product was not available and he would be added to the list of creditors.

I dont know exactly what happened of course, but it sounds like the Independent who purchased the location backed out of the deal and the old ownership group could not sustain the business and it went into bankruptcy.

So my friend is out $120,000 he thought he had for pre-paid accounts and now he has canola sitting in bins, is out the $120,000 and has to scramble to try and find product to put a crop in.

Got me thinking, really it is almost a hand shake kind of agreement when we hand over all this money. What kind of recourse does a guy really have? Im sure once the bankruptcy stuff is sorted out there wont be any money left for the farmers....I couldnt take a hit like that. This is awful, I feel so badly for those effected.

The owner of that buisness needs to be drug by the neck behind a horse

[bobofthenorth]

Taking prepaid money used to scare the living hell out of me. Its a huge responsibility and it is 100% unsecured. Those of you suggesting that the dealer should post a bond need to think that through. Your best security is if the dealer buys the product which he has guaranteed to supply you. If he puts even a portion of your money into a bond and the unpriced product goes up where do you think that product is going to come from? All you've got to work with is the dealer's word and it used to amaze me how few questions got asked between Dec 1 and whatever date in January we stopped backdating Dec. invoices.

I don't know any of the specifics of the AB dealer and I don't recognize the only principal name I could come up with on Google. What I do know is that its no accident that a bank would move now rather than in the summer. In fact the bank likely made moves earlier in the year which prompted the attempted sale and then when that fell through it was all over.

The risk of some heavy handed legislated bond "solution" is that you're going to end up with one big dealer to deal with and that dealer's name is Agrium or whatever the hell they're calling themselves now.

[bigzee]

The owner of that buisness needs to be drug by the neck behind a horse

That would be too nice!!
Things aren’t good in farming and to have something like this happen is dispicable.

[farmaholic]

Careful guys. I bet more farmers defaulted than our suppliers.

Neither is right.

I know a guy who couldn't pay his input bill for many months after it was due. You know that interest they charge on past due accounts...the supplier was so happy to just get the statement amount that he wrote off the interest....nice, "free credit". And those are the guys that will drive to the next town down the road to save five dollars a tonne or jug.

[Guest]

none of them take credit anymore they have no risk

[farmaholic]

none of them take credit anymore they have no risk

I'll repost my comments from the previous thread on this topic:

"Funny how in recent years the supply Industry was given a bit of a buffer(FCC AND WHAT EVER OTHER ESTABLISHED BANK CREDIT) against farmers defaulting payments to input suppliers own extended credit.....now some farmers are going to be out some money on prepaid expenses at an input supplier. I'm sure there are lots of examples of farmers defaulting before this buffer(outside credit source) was implemented. Maybe its time for a bond to be posted by input sellers now."

"At least post a bond large enough to cover prebuys.

Canola seed prebuying is a ****en joke! Pay your money months in advance of needing the seed .....because if you dont they have and try to use a punitive pricing structure/schedule on the people who buy closer to the time they actually need it.
Geez, pay in December for something you only pick up in spring. It should be pick it up when you need it(early May), get invoiced at the end of that month and its due by the end of June....that's a six-month spread when they have YOUR money....5 months before you even need the seed.

Then there's fertilizer......

NOBODY PAYS ME IN ADVANCE WHEN I SIGN A PRODUCTION CONTRACT "MONTHS" IN ADVANCE OF GROWING AND DELIVERING THE CROP!!!!!!!!!!!

...fish in a barrel."

I think we're on the same page.

[hobbyfrmr]

The owner of that buisness needs to be drug by the neck behind a horse

Ha ha! He/She is either in the Dominican Republic or else in the Cayman Islands. It all depends on how much money he/ she is trying to protect.

[hobbyfrmr]

none of them take credit anymore they have no risk

Agreed

[SASKFARMER]

We do that with one Company with Anhydrous at Xmas and yea its a little Risky when your handing over a check for that big amount and have nothing to take home till spring. It's a gas. Maybe like the days before viagra went down one guy went with his semi and cleaned out there chemical shed hours before.

[farmaholic]

We do that with one Company with Anhydrous at Xmas and yea its a little Risky when your handing over a check for that big amount and have nothing to take home till spring. It's a gas. Maybe like the days before viagra went down one guy went with his semi and cleaned out there chemical shed hours before.

How about a 10% non refundable deposit(if you cancel your order)? Who buys for tax purposes anymore?
So you can keep your $250K for six more months and earn paltry interest on it instead of bankrolling input suppliers and fertilizer, chemical and seed manufacturers....

[bigzee]

Had a retailer call me last Sept with a “deal” on canola seed, I LMAO. Book and pay by month end and save “X” number of dollars per bag, Oct 1 prices go up. Book canola seed in Sept for May, hmmmmm guess what I did??
Calls back two wks later explaining Bayers BIG canola seed promotion. Book your seed, no payments no interest till Sept 30, 2019, one catch ... the price per bag went up and extra $20 to compensate the interest. Hmmmmmm guess what i did? Last I looked in my shed don’t seed any bags. FN JOKE!!

[Misterjade9]

Farmaholic, you do have someone to do that, the CCGA advance, get the money before the crop even comes out of the ground.