Caceres Semilla is a family run limited liability company whose primary business includes selling corn and alfalfa seeds to the farmers and the baled hay, the seed’s output to ranchers and dairy farmers. The company has only two primary buyers, who solely work with contract growers and help in the purchase of the seeds. The company’s USP is its superior quality and it takes pains to ensure the same.
The distribution network covers only 4 provinces and the distribution is done through farm cooperatives, farm implement dealers or other farm retail stores. Customers usually book their advance orders during the autumn and the purchases are made based on the demand. In 1980s, sales grew at a brisk pace because of aggressive marketing and the company had to buy seeds from the spot market and thus they increased the number of buyers. Currently 86% are purchased from contract growers. Some customers commit in advance to buy seeds, but they cannot hold on to their commitments. This has caused a marked increase in the inventory levels.
The company financed its new plant from a long-term mortgage loan from an insurance company which bears a fixed interest rate of 13% for 20 years. The interest rate is dollar denominated and thus might result in the company paying more in terms of pesos if the peso depreciates in value.
By 1998, The Company could also take a bank loan of 4.8 million pesos at floating interest rate. The company was out of bank debt, but still the CFO sent in a loan note thereby exceeded its borrowing limits and the banker reprimanded the CFO of Caceres for not keeping him informed about the incident and also demanded 1.5% excess interest on the exceeding amount. The company was required to submit a proforma statement for the year 2000. The statement was made after a lot of thought by the senior management. However the CFO felt the company had to maintain a cash balance of 200,000 pesos at any given time.