UZA has developed a bank guarantee mechanism for grain forwards

The Ukrainian grain Association has proposed to the banking community a bank guarantee mechanism for forward contracts for grain, which will make the grain market civilized and end the problem of defaults on forwards due to price increases, the press service of the Association reported yesterday.

UZA believes that the introduction of a bank guarantee for forward grain contracts will reduce the risks of non-fulfillment of contracts by unscrupulous sellers in the event of an increase in market prices.

The new mechanism will be of interest to all market participants, as manufacturers will contact customers directly and become first-class sellers regardless of the volume of deliveries. Small and medium-sized farms will receive a fair price at the level of agricultural holdings. Additional expenses of farmers for servicing the bank guarantee will amount to 1 1/ton, which will more than cover the premium to the purchase price of grain.

As a result, buyers will avoid the risks of default and large fines for non-fulfillment of international contracts and receive first-class grain suppliers.

All this will allow Ukraine to become a premium grain market, where buyers will be willing to pay a high price for domestic products, while today importers pay 5 5-10/ton less for Ukrainian grain than for Romanian or Russian. Therefore, with the same volume of grain exports, Ukraine will receive an additional hundreds of millions of dollars and a reputation as a reliable global grain supplier.