Harvest can put a grower in an awkward position.
There is grain coming off, substantial value in the crop and bills that need to be paid now.
But that does not necessarily mean the grower wants every tonne sold immediately.
Around Moree and the surrounding northern New South Wales grain region, wheat, barley, canola and other crops form part of a major harvest economy. In recent harvests, GrainCorp has reported strong grain deliveries across the Moree region.
For some farming businesses, the finance question is therefore not simply how to fund harvest.
It is whether short-term cashflow pressure is starting to dictate commercial decisions about when income needs to be realised.
Cashflow and Grain Marketing Are Two Different Decisions
A grower may choose to sell grain at harvest for many perfectly sound commercial reasons.
There may already be contracts in place.
Storage may be limited.
The available price may suit the business.
The grower may simply want the certainty of converting the crop into cash.
But there is another situation.
Suppliers need paying.
Fuel accounts are due.
Contractors are waiting.
ATO commitments are coming up.
The operating account is getting tight.
The business then feels it has to sell grain immediately simply to generate cash.
That is a cashflow problem rather than necessarily a grain-marketing decision.
Finance should never be used to speculate on grain prices. Nobody can guarantee that holding grain longer will produce a better result.
But where the business has made a deliberate commercial decision not to realise all of its income immediately, it may be worth considering whether a temporary funding facility can bridge the operating gap.
What Does the Business Need to Pay Before the Grain Is Sold?
This is where we start getting practical at Thrive Broking.
Rather than beginning with “How much can we borrow?”, we want to know what actually needs funding.
That might include:
Harvest contractors
Diesel
Freight and cartage
Wages
Repairs and parts
Supplier accounts
Insurance
Storage and handling costs
ATO commitments
Existing business repayments
Inputs for the next cropping cycle
Once those numbers are visible, the finance requirement often becomes much clearer.
A business may think it needs $200,000.
After mapping expected income and expenses, the real peak gap might be $110,000.
Another business may discover it needs more than expected because several major commitments fall due at the same time.
After around 30 years in finance, one of the things we have learned is that the borrowing amount should come from the cashflow requirement, not the other way around.
Storage Has a Cost Too
Keeping grain rather than selling immediately is not cost-free.
Storage, handling, freight and other charges may apply.
There is also a finance cost if borrowed money is being used to bridge the period.
Those costs need to form part of the decision.
For example, if a business wants to hold grain for another eight weeks, it should understand:
How much working capital is required during those eight weeks?
What will the finance cost?
What storage or handling costs will apply?
What other income is expected during that period?
What is the repayment plan?
The purpose of working capital is not to make a grain price decision for the grower.
It is to make sure a short-term cash shortage is not making that decision by default.
Supplier Bills Can Force the Timing
Supplier accounts are often where the pressure becomes obvious.
A grower may have substantial amounts due for fertiliser, chemicals, fuel, seed, repairs or freight.
Those suppliers have their own payment expectations.
The business may have enough cash to pay them, but doing so could leave little room for the remainder of harvest or the next stage of the farming cycle.
For an eligible business, seasonal working capital may provide another option.
That could allow some supplier commitments to be met while retaining a greater cash buffer within the operation.
The key is knowing when the facility is expected to reduce.
If the loan is intended to bridge a temporary gap until grain proceeds arrive, there should be a clear pathway for repayment.
If the balance is likely to remain permanently outstanding, the problem may not be seasonal at all.
What If Paying a Supplier Early Saves Money?
There can also be opportunities to secure a genuine early-payment discount or better buying terms.
We would look at that as a numbers exercise.
Suppose a supplier offers a meaningful reduction for paying now rather than later.
The questions become:
What is the actual dollar saving?
How much needs to be financed?
How long will the money be borrowed?
What will the funding cost?
When will the business repay it?
If the finance cost consumes most of the discount, there may be little reason to do it.
If the commercial saving remains worthwhile after the funding cost is considered, early payment may deserve a closer look.
The finance should support the commercial advantage, not wipe it out.
Do Not Forget the Next Crop
Another mistake can occur when harvest income finally arrives.
There is often a long list of places for it to go.
Suppliers.
ATO debt.
Equipment repayments.
Working-capital facilities.
Repairs.
Personal drawings.
The temptation can be to clear everything possible.
Reducing debt can be a sensible objective, but the farming business still needs capital for what comes next.
The next season may require seed, fertiliser, chemicals, fuel and other inputs before another major income event occurs.
If every available dollar is used to clear the previous season and the business immediately has to borrow again to start the next one, the funding cycle deserves a closer look.
This is why we consider the next production cycle when reviewing a seasonal facility at Thrive Broking.
The question is not only:
“How do we get through this harvest?”
It is also:
“What position will the business be in afterwards?”
What If There Is Already ATO Debt?
ATO debt can significantly change the picture.
A business may expect strong harvest income but already have an ATO payment arrangement absorbing cash each month.
That means part of the incoming money has effectively already been allocated.
If supplier accounts and next-season expenses are also substantial, the available cash can disappear quickly.
In this situation, simply arranging another seasonal loan may not address the whole problem.
It can be worth reviewing:
The current ATO balance
Payment arrangements
Existing business debt
Property-secured business debt
Working-capital facilities
Upcoming seasonal requirements
Expected crop income
Depending on the circumstances, the answer might involve working capital, refinancing or restructuring existing debt.
Or the existing ATO arrangement may be best left alone.
A finance review should establish that rather than assume every debt needs moving.
A Seasonal Facility Should Rise and Fall With the Business
For some growers, the cashflow gap is not unusual.
It happens almost every year.
The facility is drawn as expenses build and then reduced when crop income is received.
Where this pattern is predictable, it may be worth investigating whether a suitable revolving or seasonal working-capital facility could better match the business cycle than arranging another new short-term loan each year.
We would want to see that the facility genuinely reduces when the season turns.
That matters.
A $150,000 seasonal requirement that returns close to zero after harvest tells a very different story from a $150,000 balance that remains fully drawn all year and requires another $100,000 the following season.
The second situation may indicate that the business has accumulated permanent debt rather than simply experiencing a seasonal timing gap.
That distinction affects which finance conversation should happen next.
Moree Is an Important Grain Harvest Region
Northern New South Wales moves into harvest earlier than many southern cropping areas, and Moree is firmly part of that grain supply chain.
Recent GrainCorp harvest reporting has highlighted strong receivals of wheat, barley, canola and other commodities across the Moree region.
That means the period leading into harvest is commercially important not only for equipment, but for decisions about cash, suppliers, storage and when seasonal income actually reaches the business.
Bring Us the Cashflow Gap Before It Makes the Decision for You
If you are farming around Moree and expect bills to fall due before you intend to realise all of your harvest income, speak with Thrive Broking before the operating account becomes the reason you have to make the next decision.
Bring us:
The major supplier and harvest bills coming up
Existing working-capital limits
ATO commitments
Current business repayments
How much grain-related income is expected
When you reasonably expect cash to arrive
How much working cash you want to retain
We can look at whether the requirement is genuinely seasonal and whether working capital, a revolving facility, debt restructuring or another commercial finance option may be appropriate.
With around 30 years in finance, our role is not simply to find another loan.
It is to understand why the money is needed, how long the gap is expected to last and what will repay the facility.
If short-term cashflow is beginning to influence bigger farming decisions, talk to Thrive Broking before those decisions become urgent.