Landcorp - Crown Ownership Monitoring Unit

LANDCORP FARMING LIMITED AND SUBSIDIARIESNOTES TO THE FINANCIAL STATEMENTS CONTINUEDNote 36 – Risk Management (continued)Commodity price riskLandcorp is exposed to risks arising from fluctuations in the price and sales volume of livestock and forestry. Where possible, Landcorp enters intosupply contracts for livestock to ensure sales volumes can be met by processing companies. Landcorp uses oil-price derivatives to hedge pricemovements on the majority of its petrol and diesel usage. Other than this, Landcorp is unable to use financial instruments to hedge commodityprice risk, due to a lack of effective hedging markets.Landcorp has diversified its main sources of livestock revenue across four product streams – sheep meat, beef, venison, milk – which provide lowerlevels of exposure to prices of any one commodity.Financing riskThe nature of livestock farming means that most of Landcorp’s revenue is received in the second half of the financial year, whereas expenses areincurred throughout the year. Landcorp manages this financing risk through budgeting and actively managing working capital requirements, as wellas maintaining credit facilities at levels sufficient to meet working capital requirements, as described in Note 26.B – Credit RiskCredit risk is the risk of loss arising from a counterparty to a contract failing to discharge its obligations. In the normal course of its business,Landcorp incurs credit risk from trade receivables and transactions with financial institutions. Landcorp has a credit policy, which is used to managethis exposure to credit risk. As part of this policy, credit evaluations are performed on all customers requiring credit over a certain amount. Limitson exposures are set and monitored on a regular basis. As at 30 June 2010 Landcorp did not have any significant concentrations of credit risk.Landcorp’s maximum credit exposure is shown below. Landcorp does not expect the non-performance of any obligations at balance date beyondthose estimated as impaired.Group Group Parent Parent2010 2009 2010 2009Note $000 $000 $000 $000Cash Balances 718 30 1,409 711Accounts Receivable 21 28,168 30,494 24,634 16,573Other Financial Assets 26 43,547 41,781 250,067 253,124Maximum Credit Exposure 72,433 72,305 276,110 270,408The status of accounts receivable at balance date was:Group Group Parent Parent2010 2009 2010 2009$000 $000 $000 $000Not yet due 27,969 30,048 24,455 16,147Past due – up to 30 days 79 146 65 132Past due – 31 to 60 days 114 47 113 46Past due – 61 to 90 days 1 161 1 161Past due – more than 90 days 5 92 – 87Total Accounts Receivable 28,168 30,494 24,634 16,573Accounts receivable are estimated to be impaired as follows:Group Group Parent Parent2010 2009 2010 2009$000 $000 $000 $000Gross accounts receivable 28,381 30,559 24,843 16,635Individual impairment (208) (37) (205) (34)Collective impairment (5) (28) (5) (28)Total Accounts Receivable 28,168 30,494 24,634 16,57390