New types of non-trade related participation in commodity futures markets

This paper explores the growing involvement of new types of non- commodity-sector-related players in commodity futures markets. This includes a discussion on the role of managed funds, the impact of the use of commodity warrants, and the direct involvement of banks. The impact of this new form of "speculation" on the price formation process on commodity futures markets is then examined, and conclusions are drawn as to the use of these markets by commodity sector actors.commodity futures market, futures, options, speculation, market efficiency

Farmers and farmers’ associations in developing countries and their use of modern financial instruments

This paper starts with an overview of the current literature on the cost of price risk exposure to developing country farmers. It then discusses market-based price risk management instruments (such as futures and options) that can be used by farmers, as well as various mechanisms through which farmers' associations can facilitate farmers' access to price risk management tools as well as lower-cost financing (using warehouse receipt finance, repos and other structured financings). The experiences with use of such modern financial tools by farmers in several developing countries (Brazil, Colombia, Guatemala, India, Malaysia, Mexico, Philippines, Uganda) are described. The report concludes with a discussion of the practicalities of farmers' associations starting to use such financial instruments, including the potential of new technologies such as smart cards.farmers structured finance warehouse receipts price risk management

Potential applications of structured commodity financing techniques for banks in developing countries

This paper discusses of a number of innovative financial techniques that can be used by developing country banks to open up new financing possibilities in the commodities sector, for industries servicing the commodity sector, and for financing on the basis of "commoditized" income streams. This includes techniques such as factoring and forfaiting, countertrade, warehouse receipt finance, prepayments, export receivables finance, Islamic finance, structured import finance, and securitization. A number of practical models for developing country banks are described.agricultural finance structured finance repos banks securitization

The feasibility of an international tropical plywood futures contract

This paper explores the potential for futures contracts in tropical (hardwood) plywood, one of the few major internationally traded commodities for which there is no yet a futures market. Commodity characteristics and market structures and practices that have an impact on the feasibility of a futures market are examined in detail, and conclusions drawn as to the way forward if one wishes to create such a market.commodity futures market, plywood

The effectiveness and usefulness for commodity-dependent countries of new tools in commodity markets: risk management and collateralized finance

This paper describes the experiences of developing country enterprises, farmers and governments with commodity price risk management and various forms of structured finance. It explores the constraints that these entities face in using modern financial markets, including counterparty and sovereign risk obstacles, and problems in their legal and regulatory framework. Various schemes to overcome such obstacles are examined.commodity futures market, futures, options, risk management, structured finance, warehouse receipts, securitization

Révolutionner le financement des chaînes de valeur agricoles

La publication « Révolutionner le financement des chaînes de valeur agricoles » produite dans le cadre du 35ème Briefing de Bruxelles (mars 2014) fournit une vue d’ensemble et une analyse du financement des chaînes de valeur et de son potentiel de transformation pour le secteur agricole et les économies des pays ACP. Les estimations considèrent que seulement 20% des populations dans la plupart des pays en développement ont accès à des services financiers formels et que, en Afrique, seulement 4% de la population totale a un compte en banque et 1% des Africains ont des possibilités de prêts ou crédits auprès des institutions financières traditionnelles (AFRACA, 2009). Cette publication examine les statuts, les systèmes, les instruments et les institutions qui sous-tendent les financements par chaînes de valeur globalement et dans les pays ACP. Différentes innovations dans le financement des chaînes de valeur sont présentées et analysées, en ce compris les innovations financières liées aux TIC (téléphone portable, M-Pesa). Pour plus d’informations sur Révolutionner le financement des chaînes de valeur agricoles, visitez le site suivant : http://bruxellesbriefings.net/briefings-precedents/le-financement-des-chaines-de-valeur-agricoles

Feasibility of and steps towards the creation of a commodity exchange in Bhutan

The report assesses whether a commodity exchange can help Bhutanese farmers, and if so, whether conditions in Bhutan allow for the creation of a successful exchange. It concludes that an exchange will reduce farmers' price risk exposure and raise their realized prices, in particular for potatoes, and recommends that a simple exchange mechanism be built around an electronic warehouse receipt system. As the size of Bhutan's economy makes a lean business model necesary for the financial viability of the commodity exchange, it is proposed that the leverages the technology and infrastructure of the Royal Stock Exchange of Bhutan

Revolutionising Finance for Agri-Value Chains

The publication on “Revolutionising Finance for Agri-Value Chains” created in conjunction with the 35th Brussels Development Briefing (March 2014), provides an overview and analysis of value chains finance, and its potential to transform their ACP countries’ agricultural sectors and economies. It is estimated that only 20% of populations in most developing countries have access to formal financial services, and in Africa only 4% of the total population have a bank account while only 1% of Africans have a loan or credit facility with a formal financing institution (AFRACA, 2009). This Publication considers the status, systems, instruments and institutions underpinning value chains finance globally and in the ACP. Various innovations in value-chains finance are presented and reviewed, including ICT finance innovations (mobile money, M-Pesa). For more information on Revolutionising Finance for Agri-Value Chains, visit: http://brusselsbriefings.net/past-briefings/finance-for-agri-value-chains

A primer on new techniques used by the sophisticated financial fraudster, with special reference to commodity market instruments

Financial instruments such as documentary credit, structured finance and derivatives have proved their value in commodity trade. However, the sophistication of these instruments can also make them a tool for financial fraud. This report discusses how, using commodity market instruments such as letters of credit, warehouse receipts, Special Purpose Vehicles, futures and swaps, the sophisticated financial fraudster may try to trick bankers, commercial counterparties, Government regulatory or tax offices, and shareholders. Various techniques that have been used in the past are described, and illustrated with case studies (e.g. the salad oil swindle, Solo Industries and Enron). Ways in which Governments, banks and commodity firms can reduce the potential for such frauds are summarized in the report’s conclusion.commodity derivatives fraud SPV Enron

Pre-financing Migrant Remittance Flows in Support of Agricultural Development in Africa

This paper discusses how migrant remittances (which are of large importance to many developing countries) can be used not only as a source of earnings, but also as a tool to generate low-cost finance (at terms better than those imposed by the country's sovereign rating). A concrete structured financing based on migrant remittances into Ghana is described in detail.migrant remittances structured finance agricultural finance Ghana