The produce industry is inherently uncertain, because Mother Nature has a lot to say when it comes to growing fruits and vegetables. As a result, prices and availability fluctuate.
“This inherent variability creates noise in the industry and ultimately makes it hard for people to trade,” Pablo Borquez, CEO and founder of ProducePay, told PYMNTS. “This ultimately permeates across the industry.”
ProducePay has been working for seven years to add certainty and efficiency to different parts of the industry. For example, the company provides trade protection, capital and market insights for members of the produce supply chain. On Feb. 18, it added another piece: a financing service for growers.
Coping with Post-Delivery Adjustments
Because perishability shapes the industry, many trades are subject to renegotiation after the fact, Borquez said. This creates uncertainty between the parties, and often makes sellers unwilling to work with new counterparties because they’re concerned about post-delivery adjustments.
ProducePay aims to change that by enabling growers to receive up to 96% of their shipment’s value 24 hours after it is received by the buyer. As it manages over $2 billion worth of transactions every year, ProducePay can diversify risk and underwrite trades in this way. The company has found that the 4% margin is enough to cover the trades that are properly due adjustments.
“We launch it to effectively add another tool to our arsenal of services that ultimately allows clients to fully close any post-delivery risk of a transaction 24 hours after delivering a trade,” Borquez said.
Read more: UK AgTech Firms Use AI, New Technology to Reduce Labor Costs, Improve Food Production
Streamlining and Protecting Supply Channels
When it comes to payments, a lot of buyers still like to pay by check. ProducePay is trying to move the industry to electronic payments. Today, most pay by automated clearing house (ACH) or by wire. ProducePay itself wires money internationally as it deals with buyers and sellers throughout the Americas.
“A big part of what we do is not just add financial vehicles, it’s ultimately add payments technology or essentially streamline payments in a way that’s much more aligned with the digital world,” Borquez said. “When we started, I would say over 50% of our clients paid by check; now, less than 20% of them do.”
The pandemic has caused people to look more closely at essential industries, and AgTech is one that has become a focus for investments. With the world becoming more complex, Borquez said he expects that more will be done to ensure reliable supply channels for food. Having the underlying payments infrastructure to do so will be an important part of that.
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