The advantages of cooperative financing in sugar beet production

Abstract

In comparison with other branches of crop plant production, the production of sugar beet requires extremely large amounts of working assets, and therefore also necessitates a higher level of input. Thus, great importance is attached to any type of solution, including the various methods of financing, which will enable the costs of production to be reduced. This topic bears particular significance in situations in which there is limited possibility for external resources, primarily bank credit, to be drawn into agricultural production, due to unfavourable assessment of the sector by the financial institutions. The most recent construction developed for the purposes offinancing the costs of sugar beet production is cooperative financing. This is a complex system of such a nature as to necessitate the participation, in various forms, of practically every entity involved in the entire process of the production of sugar products. Cooperation between the branches of industry engaged in the production of primary materials for agriculture, producers, processors, insurance companies and banks creates the opportunity for all sugar beet producers working under a production contract to gain access to external sources of funding. Another possibility which emerges is that of financing for producers, primarily those involved in small-scale production, who, on the basis of the client assessment system employed by the financial institutions, are themselves judged non-creditworthy. Cooperative financing operates in such a way as to enable state subsidies also to be included in the system, which lowers the cost of the external capital involved in financing, thus increasing the returns on the internal capital invested. Alongside this, the system retains the major benefits of the financing arrangements now regarded as traditional, including the considerable discounts which can be obtained through purchasing in high volumes, the potential to produce homogeneous products of good quality, and also the facility of the direct discussion and solving of technology-based issues and problems. Cooperative financing relieves the producer of the burden of a substantial proportion of production-related and financial risk and distributes this risk among a number of the entities involved in the production continuum.