Prices are low at harvest so I want to store my produce and sell later, but I need cash now. How does a loan against stored crop work?
Warehouse receipt financing lets you store your produce in an accredited warehouse and borrow against the receipt instead of selling cheap at harvest. You deposit graded, dried produce in a warehouse registered with the Warehousing Development and Regulatory Authority, which issues a Negotiable Warehouse Receipt certifying the quantity and quality held. You take this receipt to a bank, which lends you a percentage of the value of the stored produce, keeping a margin to cover price fall and storage cost. You keep ownership, pay storage and interest, and when prices improve you sell, repay the loan and collect the balance. Pledge loans against produce often qualify for interest subvention for small farmers up to a ceiling and period, which makes holding stock affordable. Watch storage charges, quality deterioration and the price gamble. Confirm the current pledge-loan rate, the eligible period and accredited warehouses near you with your bank.
Maine apna gehu accredited warehouse me rakha aur receipt par loan liya, harvest par sasta bechne se bach gaya. Storage charge aur byaj jodne ke baad bhi behtar daam mile. Warehouse WDRA registered hai ya nahi pehle confirm karo.
A pitfall is quality deterioration, my produce had to be properly dried and graded or the warehouse would not accept it at full value. The bank also kept a margin in case prices fell. Confirm the pledge loan rate and the eligible period with your bank before storing.
Small and marginal farmers can get the crop loan rate of interest for some months after harvest on the receipt loan, which made holding stock affordable for me. But it applies only within the eligible amount and period. Check your warehouse is accredited and ask your bank for the current terms.
Do the simple maths before storing, because storage charge plus interest plus the margin the bank keeps can eat the price rise you are hoping for. I held my soybean two months and the price did go up, but after costs the gain was modest, not the big jump traders talk about. Store only if you genuinely expect prices to rise enough to beat all those costs, otherwise selling at harvest can be better. Confirm the charges and the loan to value with your bank first.
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