Are there ways retailers manage cashflows that other agri businesses can learn from?
September 2024
It’s unfair to compare how retailers manage their cash flow to other agribusinesses.
Retailers are able to manage their cash flows effectively because they get interest-free credit on agri input purchases from manufacturers.
At present, retailers are extending that credit to their farmers in an informal way.
However, this doesn’t apply to subsidized fertilizers, as there is no credit facility available on subsidized fertilizers for retailers from manufacturers.
The same is reflected on the ground also. In the majority of my interactions with farmers and retailers, I got to know that retailers don’t provide credit to farmers on subsidized fertilizers, and farmers pay for it at the time of purchase.
From this, we can understand that the actual reason why retailers were able to manage their cash flow effectively is because of the provisions they get from manufacturers; otherwise, it would be a straightforward cash-and-carry business.
So, it’s the majority of the agri input ecosystem that enables retailers to better manage their cash flows.
Therefore, it’s difficult to identify patterns in how agri input retailers manage their cash flow and link it to other agribusinesses.