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Agricultural and other commodity producers often require finance to grow or extract raw materials which are pre-sold. Local finance may not be available to the producer and needs to be sought from an external financier, or even from the buyer themselves.
Pre-export finance is high risk for the financier as the produce or commodity may never be delivered or to the correct grade and quality. It is important therefore that the risks are carefully evaluated, and the pre-export financing structured to minimise the performance risk of paying for the commodity, in whole or in part, prior to its production and delivery.
The key risks are highlighted in the chapter and payment structures described which provide risk mitigation.