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What is Milk, Cream & Dairy Trade Finance?

For a number of years, dairy producers have struggled with declining demand in developed economies. At the same time, low commodity prices have caused retailers and producers to squeeze their supply chains, putting increasing pressure on suppliers in an industry where margins are already comparatively slim. However, rising global demand for dairy products has heralded a resurgence amongst the dairy producers able to meet it. With the support of trade finance, more and more firms are looking to export their products abroad to expand their customer base and grow profits.

Milk, Cream & Dairy Trade Finance

Firms based in high-milk producing countries engaging in international trade of their milk and dairy products have tended to focus on the enormous (and rapidly expanding) Chinese market. Though not a traditional market for dairy, rising individual per capita incomes and the popularity of diets and lifestyles perceived as “Western” have seen demand for dairy in China grow on average 12% a year since the early 2000s. Milk consumption rising across many international markets, including India, Brazil and Mexico. Moreover, increasing demand for organic and ‘clean’ food products, rising whey protein consumption, and a trend towards customers preparing and eating food at home is driving demand for relatively premium and niche products in the major dairy consuming economies, with imported dairy products helping to meet these changing consumer demands.

Dairy farms can struggle to access finance to invest in these ventures because of the large capital requirements required by retail banks, which place undue stress on their often low-margin, asset-dense businesses. Moreover, equity financing is only accessible to the largest agri-business conglomerates, starving the industry of another key source of business financing. However, dairy producers are increasingly turning to trade financiers to help them manage their cashflow by financing larger orders or one-off international transactions using trade finance products. By offering drastically reduced capital requirements on their lending, trade financiers can provide firms with the finance they need to invest in profitable ventures and pay suppliers promptly without disrupting their day to day business, whilst flexible repayment terms give them time to repay the loans from the profits of their investment.

Products financed

Key dairy products financed include:

• Liquid milk
• Cream
• Butter
• Cheese
• Ice cream
• Margarine
• Other milk products

Dairy Producer – Finance Requirements

•  Your business has dependable revenue streams
•  Your business is established and creditworthy
•  Your proposed venture has the support of an agreed buyer or seller

How the transaction works

Any dairy firm interested in trade finance should begin by submitting a request for credit. This would include a detailed overview of your business, its finances, and a plan for the venture you are seeking to invest in. Trade Finance Global will then assess these plans to judge the operational risks the cash flow poses to yourself and any potential lender and use this information to construct bespoke financial products for you to choose from. Once a lender has been identified and the terms of the finance agreed, TFG will open a line of credit to support early payment of suppliers upon completion of their contractual obligations – chiefly, proof of dispatch of the goods being purchased or sold. Once securely received, the buyer benefits from extended repayment terms, allowing them to sell the goods received at profit and repay the financier with the proceeds.

What is the SIC Code for Trade in Dairy, Milk & Cream?

Speak to our trade finance team