Farm sector merchandise and marketing firm Elders is championing its expanding financial service credentials, by claiming two of the most innovative products in agri finance.
Elders offers direct access to Rural Bank’s new farm management deposit (FMD) offset account and StockCo’s 100 per cent livestock funding solutions.
StockCo funds the full price of a livestock purchase, while banks traditionally do not extend more than 50pc.
Producers are subsequently acquiring, finishing and trading more livestock than they otherwise could have done, says Elders.
“This creates great opportunity for savvy producers,” said Elders financial services general manager, Liz Ryan.
“We’re seeing StockCo customers achieve average net trading margins of 20pc to 25pc without having to invest their own capital.
The FMD offset package offers farmers the chance to manage uneven cash flows and taxable incomes from year to year as earnings vary with seasonal and market fluctuations.
Producers can set aside up to $800,000 pre-tax income, drawing on it when required at a later date, while also claiming a tax deduction if the funds stay in a FMD at least a year.
In the same way as a residential mortgage offers offset account, eligible primary producers can now use their FMD balance to offset interest payable on farm loans held with the same financial institution.
To date, Rural Bank is the only bank offering a FMD offset product.
“The product has potential to allow individual eligible producers to significantly cut interest costs on farm debt – also potentially meaning less revenue for the bank,” Ms Ryan said.
She said the account generously worked in favour of eligible primary producers, which may be why the big banks were yet to offer a similar product.
“But the strategy can work for a smaller challenger bank like Rural Bank if we’re attracting new customers from those not offering this product,” she said.
“From a client perspective, we understand the challenges that producers face from season to season.
“This offering softens the blows of the impact of seasonal variations and is a useful tool in an unpredictable industry.”
The new FMD offsets complemented Elders’ agribusiness finance funding for livestock via StockCo, which it bought a 30 per cent ownership stake in late last year.
Under that model, livestock are paid for by StockCo and when sold again the producer receives the sale price, less the purchase price and finance cost.
“StockCo offers producers the opportunity to trade livestock without tying up cash,” Ms Ryan said.
“The StockCo offering is particularly relevant for producers at the moment, with strong livestock prices and plenty of feed available in most parts of the country.”
Elders has a team of almost 100 agri finance experts who live, work and provide financial guidance within farming communities.
“We have a good understanding of the challenges that farmers face and products we distribute are a reflection of this understanding.
“We pride ourselves on having a unique agri finance operating model strongly geared towards the needs of rural Australia.”