RE:RE:Financial Post article on Thursdaymferguson71 wrote: This business model is no different than the North American ag industry. Only difference is that there is an institutional lender that accepts the risk. But the theory of taking it and paying for it 6 months later is not a surprise.
Hello mferguson,
Thanks for your post regarding the models used in the Ag industry to assist farmers. I agree it is a common practice for farmers to receive the inputs they need (seed and fertilizer) and not have to pay for these essential inputs until they have generated a saleable (and we assume profitable) crop. As you pointed out, this financing arrangement is often accomplished through an institutional lender (a bank or co-op), who pays the supplier immediately and then collects from the framer at harvest time, adding a cost of financing to the ultimate bill.
The point of my prior post was to note the statement that the Coffee farmer being interviewed in Minas Gerias stated that he had been required to order and PAY, up front, for his fertilizer 6 months prior to it being delivered. And now the promised pre-paid product was not available for delivery too him. In comparison, Verde's approach to first deliver the product without payment, and then allow 6 months before expecting payment (with or without a financing charge - the Company hasn't shared this information) seems to be a very generous alternative.
With this generous delivery and financing arrangement, my next question was why has the Company added over 60 local sales representatives onto the Company payroll to try to "sell" the product to farmers. Surely all you need are call centre representatives to take orders, in the event the farmers are not lining up at the Verde web page ording the product directly online without the need for a sales person's input?
I thought this was a reasonable question to put to Mr. Veloso during the November Q&A session - perhaps if another shareholder asks the question instead of me he might decide to attempt to provide an answer and not simply call me out as frustrated auditor and so ignore the question completely.
Cheers,
S.