Grain financing from the banks point of view
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GRAIN FINANCING FROM THE BANKS POINT OF VIEW. HARKÁNY June 22nd 2009. Papp Dániel – Trade Finance/ Raiffeisen Bank. The grain market's volume and financ ing. 10-16 Million Tons of yield worth of 300-500 Billion HUF grain financing worth of 100-200 Billion HUF

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GRAIN FINANCING FROM THE BANKS POINT OF VIEW

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Grain financing from the banks point of view

GRAIN FINANCING FROM THE BANKSPOINT OF VIEW

HARKÁNY

June 22nd 2009

Papp Dániel – Trade Finance/ Raiffeisen Bank


The grain market s volume and financ ing

The grain market's volume and financing

  • 10-16 Million Tons of yield worth of 300-500 Billion HUF

  • grain financing worth of 100-200 Billion HUF

  • Supply financing secured by warehouse warrant

    - Warehouse warrant as stock

    - Warehouse warrant and liquidation

    - Warehouse control and intervention

    - Material and storage specialities of the grain

Papp Dániel – Trade Finance/ Raiffeisen Bank


The raiffeisen bank s participation in the domestic grain financing

The Raiffeisen Bank’s participation in the domestic grain financing

  • Raiffeisen: focusing on grain financing for the last 10 years

  • Key industry

  • Market leader every year

  • Credit stock yearly between 35-55 Billion HUF

    Locally available customer service for higher flexibility.

Papp Dániel – Trade Finance/ Raiffeisen Bank


Season 2007 2008

Season 2007/2008

  • In autumndrastic price increase, in springdrastic price drop

    Causes:

    - The EU puts intervention stocks on the market

    - In the neighbouring states the yield was good

    - Strong forint (weakening export)

    b) Increased fraud events

    Causes:

    - Intervention stock’s “chaos”

    - Effect of bank replenishment cover andforced liquidation

    - Lack of warehouse control (Bankruptcy of Danubius)

Papp Dániel – Trade Finance/ Raiffeisen Bank


Season 2007 20081

Season 2007/2008

c) Trust crises among the market participants

- customers – warehouses

- customers – banks

- banks – warehouses

Papp Dániel – Trade Finance/ Raiffeisen Bank


Season 2008 2009

Season 2008/2009

  • consolidatedcircumstances, lowerprice volatility

  • More careful bank approach

  • 2008 Autumn : crises

    - Interbank liquidity crises

    - Economic crises

Papp Dániel – Trade Finance/ Raiffeisen Bank


Challenges of season 2009 2010

Challenges of Season 2009/2010

  • Increasing price volatility, uncertain yield outlook

  • Uncertain EUR/HUF exchange rate

  • lack of resources at agricultural participants

  • Situation of banks

    - expensive resources

    - focus on risk

    - there is no unlimited growth

    - trust crises towards the other market participants (customers, warehouses)

Papp Dániel – Trade Finance/ Raiffeisen Bank


The risk for banks in grain financing

The risk for banks in grain financing

  • Market risks

    2) Fraud risks

    3) Warehouse risks

Papp Dániel – Trade Finance/ Raiffeisen Bank


1 market risks

1) Market Risks

a) Development of market price

- replenishment cover obligation according to the market price

- decrease of financing ratio

- involvement of external grantors (Hungarian Development Bank, HG)

b) exchange rate risk for foreign currency credit

- mainly HUF credits

- lower fin. ratio in case of non HUF credit

c) Liquidity risk

- finding the right time

Papp Dániel – Trade Finance/ Raiffeisen Bank


2 f raud risks

2) Fraud risks

- transfer of goods without bank permission

- continuous control (warehouse and bank)

- find personal responsibility

Papp Dániel – Trade Finance/ Raiffeisen Bank


3 warehouse risks

3) Warehouse Risks

- publicwarehouses work together

- judging public warehouse guarantee , public warehouse limits

Papp Dániel – Trade Finance/ Raiffeisen Bank


Raiffeisen bank s grain season 2009 2010

Raiffeisen Bank’s grain season 2009/2010

Goal: Carry on as market leader. In season 2009/2010 Raiffeisen is still focusing on the agricultural companies

  • As the agricultural companies have liquidity problems, possibly highfinancing ratio, but at the same time

  • Daily price control

  • Very strict physical control in place

  • Personal responsibility

Papp Dániel – Trade Finance/ Raiffeisen Bank


Raiffeisen bank s grain season 2009 20101

Raiffeisen Bank’s grain season 2009/2010

  • Short term HUF, (EUR) credits

  • Standard products: food gradewheat, feed grade wheat, feed grade sweet corn, feed grade barley, sunflower, rape

  • Between 75% - 95% financing rate (on basis of crop, customer credit, fix priced buyer contract or other warrant)

  • Hungarian Development Bank’s “grain current assets creditprogram”

Papp Dániel – Trade Finance/ Raiffeisen Bank


Thank you for your attention

Thank You for Your Attention

Raiffeisen Bank

Partner of agricultural companies.

For information about crop financing please visit our local branches.

Papp Dániel – Trade Finance/ Raiffeisen Bank


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