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Agri Revolution

Agri Revolution. Hans Wortelboer. Financing the Agricultural Value Chain. The experience of an international bank in building and integrating a more efficient agricultural supply chain environment. Rabobank’s position in the agricultural supply/value chain Four examples:

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Agri Revolution

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  1. Agri Revolution Hans Wortelboer

  2. Financing the Agricultural Value Chain The experience of an international bank in building and integrating a more efficient agricultural supply chain environment. • Rabobank’s position in the agricultural supply/value chain • Four examples: • Sustainable Agriculture Guarantee Fund • Warehouse Receipt Finance Eastern Europe • Integrated Agriculture Finance Structure • Ownership Based Financing

  3. Financing the Agricultural Value Chain Rabobank is well positioned in the international agricultural value chain International Food & Agribusiness Focus Strategy Network of 250 offices in 35 countries, outside The Netherlands Offering specialized products and services

  4. Rabobank International Network Singapore Mumbai New Delhi Jakarta Bangkok Taipei Hong Kong Beijing Shanghai Tokyo Toronto New York Chicago Atlanta Dallas San Francisco Washington Warsaw Poznan Moscow Budapest Istanbul London Dublin Antwerp Frankfurt Paris Madrid Milan Utrecht Mexico City Curaçao São Paulo Santiago Buenos Aires Sydney Melbourne Brisbane Auckland

  5. Sustainable Agriculture Guarantee Fund In many (developing) countries the agricultural sector lacks sufficient and affordable financing: • Limited involvement of local banks • Heavy collateral conditions/high financing costs • Transaction size often too small for foreign banks • High dependence on expensive intermediaries However: • Increasing long term off-take commitments from food processors and retailers • Premium prices for special and sustainable products

  6. Sustainable Agriculture Guarantee Fund Rabobank has organized guarantee fund. Objective: • Enhance the access of agricultural producers in developing countries to credit for production, processing and marketing of their products on commercial and sustainable terms • By increasing the involvement of the local financial sector

  7. RABOBANK (i.c.w. Dutch Ministry of Foreign Affairs/DGIS & NGOs) Fund-management + Participation Funding Guarantee (50-90 %) Sustainable Agriculture Guarantee Fund Local Intermediary Lender IN CASE OF CLAIM TRIANGULAR AGREEMENT Credit Credit Appraisal Collateral Eligible Borrowers (Certified Producers)

  8. Warehouse Receipt Program – Eastern Europe EBRD & FAO organized Warehouse Receipt Program, to allow agricultural producers and processors to obtain working capital by using agricultural products stored in licensed warehouses as collateral. Based on: • Creation of appropriate legal framework • Out-of-court enforcement procedures • Certification of warehouses • Organization of Indemnity Fund

  9. Warehouse Receipt Program – Eastern Europe The implementation has been very successful, with substantial increase in finance activity. It provides good platform for financial institutions including Rabobank to expand exposure and increase liquidity in the agricultural value chain.

  10. Integrated Agriculture Finance Structure Objectives: • Risk mitigation for farmer financing • Secure good quality raw material for processors • Improve market position for equipment suppliers • Effective involvement of the bank in the agricultural value chain

  11. Integrated Agriculture Finance Structure Equipment purchase contract Supplier Insurer Insurance contract Buy-back agreement Transfer of lease payments Rabobank Down payment Lease contract Farmer Processor Long-term raw materials supply contract

  12. Integrated Agriculture Finance Structure Mechanism: • Down-payment by the farmer • Repurchase agreement from equipment supplier • First loss guarantee from processor • Insurance and maintenance contract

  13. Ownership Based Financing of Agricultural Commodities Objectives: • Mitigate legal and regulatory issues • Improve the company’s balance sheet structure Conditions: • Liquid commodity markets • Effective risk mitigation: price risk hedging, quality certification, warehousing, collateral management

  14. $ t=0 Rabobank Trader/ Processor $ + i goods t=1 goods Ownership Based Financing of Agricultural Commodities goods $ t=0 Trader/ Processor Rabobank t=1 goods Farmer/ Trader

  15. Experiences and conclusions • Thorough analysis and preparation • Partnerships based on long term commitments • Strategic and economic relevance

  16. Thank you ! hans.wortelboer@rabobank.com

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