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GRAIN FINANCING FROM THE BANKS POINT OF VIEW

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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  1. GRAIN FINANCING FROM THE BANKSPOINT OF VIEW HARKÁNY June 22nd 2009 Papp Dániel – Trade Finance/ Raiffeisen Bank

  2. 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

  3. 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

  4. 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

  5. Season 2007/2008 c) Trust crises among the market participants - customers – warehouses - customers – banks - banks – warehouses Papp Dániel – Trade Finance/ Raiffeisen Bank

  6. Season 2008/2009 • consolidatedcircumstances, lowerprice volatility • More careful bank approach • 2008 Autumn : crises - Interbank liquidity crises - Economic crises Papp Dániel – Trade Finance/ Raiffeisen Bank

  7. 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

  8. The risk for banks in grain financing • Market risks 2) Fraud risks 3) Warehouse risks Papp Dániel – Trade Finance/ Raiffeisen Bank

  9. 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

  10. 2) Fraud risks - transfer of goods without bank permission - continuous control (warehouse and bank) - find personal responsibility Papp Dániel – Trade Finance/ Raiffeisen Bank

  11. 3) Warehouse Risks - publicwarehouses work together - judging public warehouse guarantee , public warehouse limits Papp Dániel – Trade Finance/ Raiffeisen Bank

  12. 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

  13. 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

  14. 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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