Canadian farmers follow miners, stream crops for cash
By Rod Nickel
WINNIPEG, Manitoba (Reuters) - Canadian canola farmers are tapping an alternative form of financing more often used by cash-hungry miners, turning a small Saskatchewan company into one of the country's biggest suppliers of the oilseed.
Regina-based Input Capital Corp INP.V, which does not own a tractor or grain bin, now controls 75,000 tonnes of canola production through contracts with 78 farmers, up from just five in 2013.
Input, which has a market capitalization of about C$200 million ($153.43 million), says it is the first company in the world to buy "streams" of farmers' future production. The practice was pioneered among miners by Silver Wheaton Corp SLW.TO.
While farmers have long used forward sales contracts to hedge the price they get for their crops, Input's model offers the advantage of upfront payment. Input aims to profit by paying a discounted price for the oilseed, used to make cooking oil and margarine.
Streaming currently accounts for less than 1 percent of this year's harvest in the world's biggest canola producer. But as Input grows, it may claim a larger share of the farm credit business of Canada's major banks and other lenders.
"There is a dearth of working capital available to farmers," said Input Chief Executive Doug Emsley. "Farmers need cash when they have crop in the bin, because they can't necessarily monetize it when they want to."
Input's niche model has helped it attract investors including Sprott Asset Management.
"They're first to market and they're making it more and more difficult for other financial institutions to provide an equal service," said Sprott portfolio manager Jason Stevens. Continued...