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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
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