With the development of modern agriculture, the role of agricultural machinery in agricultural production is becoming more and more important. However, due to the particularity of agricultural machinery and the high price, the phenomenon of credit sales is increasing, and the risks brought by agricultural machinery credit sales are gradually highlighted.
This article will discuss the particularity of agricultural machinery credit sales, the prevalence of credit sales, the risks faced and the corresponding countermeasures.
First, the particularity of agricultural machinery sales
The particularity of agricultural machinery sales is mainly reflected in the following aspects.
1. Seasonal demand
Seasonal demand is an important factor in the sales of agricultural machinery. Agricultural production is closely related to the seasons, so farmers' demand for farm machinery will also increase rapidly with the arrival of the planting and harvesting season.
During the planting season, farmers prepare the land, plow, sow seeds and carry out other planting activities. At this time, they usually buy agricultural machinery in large quantities, such as cultivators, seeders, sprayers, etc., to improve work efficiency and reduce labor intensity.
During the harvest season, farmers need to harvest and handle their crops. To complete these tasks more quickly, they buy agricultural equipment such as harvesters, tractors, and balers. These machines help farmers improve yield and quality while saving time and labor costs.
However, during the non-production season, the demand for agricultural machinery is relatively low. This is because farmers at this time mainly carry out land fallowing, resting and preparation, and do not need to use agricultural machinery on a large scale. Therefore, during this period, agricultural machinery sales may decline, and suppliers may adjust production and inventory strategies.
2. High purchase cost
The high purchase cost is a major problem farmers face when purchasing agricultural machinery. The price of agricultural machinery is usually higher, which is beyond the purchasing power of many farmers. Due to the continuous development and improvement of agricultural machinery technology, new, efficient machinery and equipment are often more expensive.
Farmers often seek other ways to buy farm machinery and equipment, for example by selling it on credit. This means that they can reach an agreement with the supplier to purchase agricultural machinery equipment in installments over a period of time. This may be a viable option for farmers, as it allows them to share the cost of paying while using farm machinery and equipment.
3. High technical content
Modern agricultural machinery often has complex operating interfaces and functions, such as automated control systems, GPS navigation, and precise fertilization. Understanding and becoming proficient in applying these features requires specialized training.
There are certain safety risks in the operation of agricultural machinery, such as rolling parts, rotating parts, high-temperature parts, etc. Correct operating methods and precautions can improve work safety and reduce the risk of accidental injury. Training helps farmers understand and comply with relevant safety regulations.
Timely inspection and maintenance of agricultural machinery is the key to maintaining its normal operation and extending its life. Farmers need to learn how to diagnose and fix faults so they can quickly resolve issues when needed and reduce downtime.
Skilled operation of agricultural machinery can significantly improve the efficiency and yield of agricultural production. Through training, farmers can learn how to properly operate and adjust farm machinery equipment to maximize its functionality and potential.
Second, the phenomenon of credit sales is widespread
Credit sales refer to the purchase of agricultural machinery and equipment by farmers by borrowing money from distributors or manufacturers, and then repaying the loans on schedule in the next few years. Credit sales are widespread in rural areas for the following reasons:
Limited purchasing power: Farmers often face a shortage of funds and cannot pay the high cost of purchasing agricultural machinery at one time.
Lack of access to finance: Farmers lack effective access to finance and access to loans or other forms of financial support.
Low tolerance for economic risk: Agricultural production is affected by uncertainties such as natural disasters and market fluctuations, and farmers tend to be exposed to higher economic risks. Selling on credit can reduce the pressure on farmers' cash flow and mitigate risks.
3. Risks faced
The risks faced by agricultural machinery credit sales mainly include the following aspects:
Subsidy cashing risk: Farmers often rely on the government's subsidy policy to purchase agricultural machinery, and if subsidies are not in place in time, farmers may not be able to pay for the purchase of agricultural machinery on time, thus increasing the risk of credit sales. Dealers may need to advance the amount of subsidies to farmers, which will increase the financial pressure and operational risks of distributors.
Credit risk: Farmers may not be able to repay their borrowings on time for a variety of reasons, exposing distributors or manufacturers to credit risk.
Market risk: The agricultural machinery market is affected by many factors, such as agricultural policies, market demand, technological progress, etc. If the market changes, it may lead to a decline in the price of agricultural machinery or poor sales, increasing the risk of credit sales.
Maintenance risk: Farmers may not be able to maintain and maintain agricultural machinery and equipment in time due to unskilled technology or economic difficulties, resulting in an increase in equipment failure rate, increasing maintenance costs and the risk of distributors.
4. Response measures
In order to reduce the risk of agricultural machinery on credit, the following countermeasures need to be taken:
Risk assessment: Before selling on credit, a detailed risk assessment is carried out, including the investigation of the credit status, willingness to repay and repayment ability of farmers. Through evaluation, farmers with high repayment ability and reliable credit are screened out to reduce the risk of credit sales.
Sign a contract: Sign a clear credit contract with the farmer, stipulating the rights and responsibilities of both parties, and clarifying the repayment period, interest rate and penalty interest. Through the constraint of the contract, improve the farmers' awareness of repayment and reduce the risk of default.
Introduce a guarantee mechanism: Farmers are required to provide guarantees or third-party guarantors to increase the guarantee of repayment. The guarantee can be a mortgage, security deposit or other form of guarantee for the farmer's assets to ensure that it can be compensated when the risk of repayment occurs.
Implement strict supervision and management: establish a sound credit sales management system, and strengthen the supervision of farmers' repayment. Communicate regularly with farmers, remind and urge repayment, identify problems in time and take corresponding measures.
Diversified repayment methods: Provide farmers with a variety of repayment methods, such as cash, bank transfer or electronic payment methods such as Alipay. This can facilitate farmers to choose the appropriate repayment method according to the actual situation, and improve the timeliness and accuracy of repayment.
Establish a risk reserve: Agricultural machinery manufacturers or distributors can establish a special risk reserve to deal with the loss of funds caused by the risk of credit sales. By reserving a certain amount of funds, losses caused by farmers' defaults can be mitigated.
V. Summary
Farmers often face a shortage of funds to purchase farm machinery, which makes it impossible for them to pay the high purchase costs at once. Due to the imbalance between the development of agricultural mechanization and farmers' purchasing power, many farmers find it difficult to afford the cost of new agricultural machinery.
To address this issue, there are steps that governments, agricultural cooperatives and financial institutions can take to provide financial support. In addition to the existing policy of non-ownership of agricultural machinery, low-interest or discounted loans can be adopted to enable farmers to pay the purchase cost in installments. In addition, an agricultural machinery sharing platform can be set up for farmers to rent agricultural machinery on demand, thereby reducing purchase costs.
In addition, farmers can share the purchase cost and the benefits of using mechanized equipment by working with neighboring farmers to purchase agricultural machinery. This form of cooperation helps to reduce the economic burden of individual farmers and improve the efficiency of resource use. Further, encouraging and guiding all localities to establish agricultural machinery cooperatives or agricultural machinery socialization service organizations is also a solution.