STEPHEN CARR LESSONS FROM DISTRESSING
DISASTER
News of the financial collapse of grain merchant Alexander Inglis & Son, based near Tranent in East Lothian, a leading supplier of grain to Scotland’s whisky and distilling industries, seems like a distant problem for an arable farmer in the South East of England. But are there lessons we can all learn from this distressing disaster? The merchant was put into administration in May and emotions are running high among farmers who fear that they will never be paid fully for grain sold through the company or stored in its silos. There were few warning signs to alert farmers of the firm’s imminent collapse. Only last December, the business recorded a profit of £1.77 million on a turnover of £99 million. Over the past decade, the merchant has purchased an additional 100,000 tonnes of storage, complete with a grain-drying complex. It boasted facilities in the Lothians, Perthshire and Northumberland. To top it all, it was owned by Jim Aitken, captain of Scotland’s Grand Slamwinning rugby team of 1984, and his family. But it turns out that the directors of the firm had been resigning since December. Now administrators have been appointed and they have reported that the stores hold “significantly less grain than expected”, which means there is not likely to be enough grain to meet the claims of creditors. It also appears that what consignments of grain there are in the firm’s stores have not been stored separately. This makes it nigh on impossible for arable farmer clients to identify their grain which, in turn, has led the administrators to declare that they “will sell the stock of grain that is in the stores and place the funds on account”. As usual in such cases, it seems that farmers will be well down the queue of creditors. For arable farmers, grain merchant insolvency is a cruel blow. We learn to live with what nature throws at us: adverse weather, disease and pests. We accept that we also have to grapple with the vagaries of subsidy systems, trade policy and arable commodity price volatility. But we all like to think that once we have ‘harvest home’, our crops are safe. To find out that grain was anything but safe in Alexander Inglis & Son’s stores is the stuff of an arable farmer’s worst nightmare. The potential for grain merchant payment default has been the main reason why I have always been a member of a farming cooperative that offers payment insurance on most of the value of any grain contract. I have occasionally sold grain direct to a merchant with payment not insured, but the premium has had to be large and the tonnage small. The freedom to be able to sell considerable tonnages (say, 1,000 tonnes of milling wheat on a single contract for delivery in one calendar month) and not have to worry about whether I am going to be paid, is worth every penny of the insurance premiums involved. I’m not a particularly ‘cooperative’ minded farmer, but group grain sale insurance has always persuaded me to pay the membership subscriptions without a second thought.
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