Haymakers protect payday: Common sense can keep buyers, sellers safe

09.06.11

Experts stress the need for strong contracts, forcing buyers to make payments

By Carol Ryan Dumas

Capital Press

Industry insiders say hay prices high, supplies short and a struggling economy have increased the chances of fraud and payment incidents on both ends of the sales transactions.

But experts say there are good producers and buyers sense precautions to help prevent them from becoming victims.

While businesses often hay in large quantities on the futures, cash on delivery is a good practice to protect the buyer and seller.

Producers have to take preventive measures, said Clark Kauffman, an applicant, a producer of hay in Idaho and former president of the Association of Producers of Idaho Hay & Hay now Idaho Association fodder.

"Get paid before you" sell "hay," he said.

"My policy is that unless someone I trust in the long term, I receive (pay for) 90 percent of my estimated weight before something comes out of the farm," he said.

As for selling to someone they do not know, it is prudent and never keep the delivery without payment, he said.

"If I give a ton or two and are not paid, so I went out a couple of tons, not 100 tons," he said.

In addition, when it could sell to people he knows and trusts with only a verbal agreement, certainly not the best practice, it never deals with someone he does not know, without a written contract, he said.

It also suggests to take things a step further with someone a producer does not know or believe have trouble.

"You sell a high-dollar, why not get a credit reference from their bank?" he said.

Due diligence

"They must be very firm as their relationships with other companies," said Roger Cramer, president of Farm Credit Services of Northwest Vice risk management.

Just like a bank would need information in a loan application, they could ask for financial information, tax returns, financial statements, income sources, and how long the person has been in business, he said.

Source: Capital Press (subscription)