Seeding change: financing farm inputs

Philippe Giraudet, Syngenta (left) with Giuliano Marello, DLL (right)

As the global demand for food grows, the agribusiness industry is looking for new ways to grow with it. But for those looking to invest in ‘farm inputs’ that represent poor collateral value, it’s been difficult to secure annual financing—until now. Together with global agrochemical and seed pioneer Syngenta, DLL has introduced an innovative new financing model that makes purchasing farm inputs easier and less risky.

Financing aside, agriculture has always been a volatile business, with unpredictable weather, crop disease, fluctuating prices and high up-front costs. Two specific circumstances brought Syngenta and DLL together. The first was rapid consolidation in the agribusiness market. While poised for long-term growth, the consolidation trend required Syngenta to introduce new and unique farm input propositions. The second was the need to offer Syngenta’s dealers payment terms that matched the cash flow of their customers in each market.

Deep roots in agriculture

According to Philippe Giraudet, Syngenta’s Head of Financial Solutions, a particular challenge for Syngenta was that banks lack the agricultural understanding to finance farm inputs.

“They do not know how to price risk and crop cycles, and few have a truly global scope,” he says. “I was struck by DLL’s expertise in agriculture and the overlap between our portfolios and contacts. This led us to explore ways to develop a captive financing program for farm inputs.”

With its strong ties to Rabobank and historical roots in agriculture, DLL also recognized the synergies. “Syngenta asked Rabobank to facilitate their go-to-market strategy, and we introduced them to DLL,” says Matthijs Mondria, Rabobank Sector Head for Farm Inputs. “The team did a fantastic job leveraging their unique operating platform to create a distributor finance program in Italy. This is a great example of a client-centric partnership between Rabobank's business lines.”

“While Syngenta is new to farm inputs, its needs were no different from our other manufacturing partners. We understand farmers’ needs and the agricultural distribution channels,” adds Giuliano Marello, DLL’s Vice President of New Business Development for EurAsia.

Risk sharing

Syngenta and DLL developed and trialed their new farm inputs finan¬cing model in Italy, with an initial goal to finance 20% of sales.

“This is the first example of vendor financing applied to farm inputs,” adds Marello. “Our main challenge was managing the risk involved with financing a product that has poor collateral value. We share the risk through a structure tailor-made to Syngenta, which allows us to extend 100% of the credit line that Syngenta needs while mitigating risk for both parties.”

“By combining our respective product and market insights, we enable Syngenta's dealers to purchase more inventory, putting them in a better position to grow sales,” says Roger Bryan, Senior New Business Development Commercial Finance at DLL.

The pilot program in Italy has been a huge success. Syngenta’s dealers, the program’s main targets, are happy with the flexible payment terms and increased sales. Syngenta has improved its liquidity and increased its market share, and DLL has a new offering in a new area of business.

Growing and expanding

“In addition to their affinity for agriculture, DLL is able to white label their offer to us and has the global reach to scale it,” says Giraudet. “Those are important qualities for our financial solutions partner.”

Syngenta and DLL have expanded their collaboration to Portugal, and are currently exploring new models, such as farmer financing and new geographies.

“Farm inputs signify a new dimension for DLL, and we really want to develop the full potential of this exciting new partnership and sector,” concludes Marello. “This is just the beginning of a great story.”