Not only agro-exporters in Mexico and Latin America face great challenges when it comes to placing their fruits and vegetables in the U.S. market, but national growers also have a variety of challenges to deal with.
They might not have to cross international borders to send their products to buyers, but it does not imply that their operation is easier, since they face labor shortages, which is forcing them to increase the implementation of technology allowing them to be more competitive.
This generates a greater need for cash flow, since factoring services are expensive in the United States, and traditional banking does not respond to the immediate needs in the fields, meaning that many farmers could become vulnerable during certain times of the season.
Other industries are paying more, which has been a problem for many U.S. growers, as labor shortages have become a major factor, affecting their competitiveness in recent years.
Even though the Fair Labor Standards Act (FLSA) currently requires that most farm workers be paid at least the federal minimum wage of $7.25 per hour, growers must offer much more competitive wages to get and keep the workers on the farm, otherwise they will not get enough farm labor.
In fact, in California, the most important fruit and vegetable producing state, the current minimum wage is $15 per hour plus some benefits, primarily health insurance. Increasing the wage is a measure that has been adopted to retain labor, but of course it requires increasing production efficiency to continue generating profits.
The commuting of workers from farms to cities is ongoing, not just in the U.S., but all over the world, leaving less and less people in charge of producing the food that everyone consumes, so the implementation of technology is essential.
We are even talking about technology that allows automating tasks, so autonomous tractors, robots and drones have an assured future in the agribusiness. However, to access these and other technologies, growers must make a high investment, which can hardly be covered with normal cash flow, so adequate financing services are necessary.
Many technologies could enable growers to increase their production efficiency as well as increase yields and thus improve the return on investment, but most of them decide not to invest in these technologies because many financing services are not well adapted to their specific agricultural needs.
Expensive factoring services
Growers need to keep a steady cash flow to keep their operations running, so the beginning of harvest is often the most critical time of the season: they have invested in the vegetative stage of the crop so their cash flow is at a minimum, and although they may have already sent their first shipments, it takes 30 to 60 days for buyers to pay.
This leads some growers to resort to factoring services in order to have cash flow, but this considerably decreases their profits as factoring services in the U.S. are expensive, about 10%. Thus, although factoring is a solution for many growers, they only resort to it as the last option, precisely because it is a costly service when it should be a fairer service.
By factoring we refer to the process by which an agricultural company markets its accounts receivable, in other words, sells its invoices to another company, thus obtaining immediate cash to continue its operation.
How does ProducePay support U.S. growers?
At ProducePay we understand the challenges U.S. farmers face when marketing their products, which is why we have developed financing services that truly provide a solution for all those working with us.
One of these services is Quick-Pay+, our factoring service through which you receive up to 96% of the value of your shipment within 24 hours after your buyer confirms receipt, giving you immediate access to your money to cover labor, buy inputs, ship more produce, or continue with your operation.
In addition, to obtain Quick-Pay+ you only need information that we know you have at your fingertips, so it is a financing service that suits the field needs you have. In addition, you must be part of our Marketplace, through which you can find pre-qualified buyers for your fresh produce, thus ensuring the security of your transactions.
Do you buy fresh produce? Join our Marketplace to securely trade with a trusted counterparty and to establish long term relationships.