Статья посвящена вопросам, связанным с ценовыми рисками в аграрном секторе украинской экономики. В этой связи рассматривается рынок деривативов, причем отмечается слабость такого рынка в Украине, чем определяется интерес, проявленный автором к вопросам инвестирования за границу.
Even in difficult 2014, the agricultural sector was top in Ukraine. One in every three dollars of foreign currency earnings in Ukraine in the last year was earned by agrarians.
However, this year saw a number of external factors that have complicated the management of agribusiness. Inflation and exchange rate fluctuations have threatened the loss of part of the profit made in the previous year. The inability to buy necessities (fuel, plant protecting agents) before the new season has increased. The Hryvnia was devalued and, as a result, savings in Hryvnia fell too. Regulatory acts of the National Bank of Ukraine (hereinafter — the NBU) with the requirement to sell 75% of foreign currency earnings do not allow savings in US dollars to be accumulated.
Many farmers are trying to protect themselves from these effects and either do not sell products unless it is absolutely necessary, or sell products and on the same day (at the same exchange rate) buy, as for example, fuel, fertilizers, plant protecting agents. Despite the depreciation of the Hryvnia, the cost of agricultural production is correlated with international prices. That is why the dollar equivalent of the price of products would be the same. It would be so if there was no price risk.
But the price risk for the agricultural business is a key one. It is important not only to grow products, but it is more important to sell them at a good price. There is a risk of “not to guess” the price (the day of sale) and lose a significant share of the profit. The Ukrainian agricultural products market is an integral part of the world market. Thus, the fluctuations in world market prices are also reflected in prices on the Ukrainian market. News about a good harvest (or drought) in South America immediately affect prices in Ukraine.
However, the price risk can be managed. Ukrainian farmers manage price risks with varying success. Someone holds on to products and waits for the “right” price. Someone uses the services of specialized consultants. All these attempts are attempts “to read” and “to predict” the market, rather than insurance against a possible fall in prices.
Derivatives may serve as insurance in this case. They are valuable for farmers due to possibility to manage risks (hedging). These financial tools include forward and futures contracts, options, swaps. All of them are widely used in the world. In effect, an agricultural supply company receives a guarantee that its products will be bought in a certain amount at a fixed price.
Futures and options are often used as insurance against price risk. A futures contract is the standardized exchange tool. It fixes the agrarian company’s obligation to deliver a certain amount of goods. If the company does not deliver the products, it will be hit by penalties. Therefore, futures are convenient to fix prices, but in the case of a substantial rise in prices for agricultural products futures will result in the loss of profit.
Options are more flexible tool and can be either exchange-traded or over-the-counter. The option may, for example, include the obligation of the buyer to purchase a fixed amount of produce at a fixed price and the right (but not the obligation) for supply company to deliver products. Thus, the Ukrainian agricultural company may reserve the right to refuse delivery. In this case, the company loses only the money spent on the purchase of the option, but the products can be sold at the current market price.
However, the derivatives market is limited for Ukrainian agricultural companies by at least two factors.
Organizational factor. There is no well-functioning derivatives market in Ukraine. This factor limits the possibility of using Ukrainian derivatives.
Legal factor. National legislation does not perfectly regulate the turnover of securities. This factor eliminates the ability to purchase derivatives legally abroad.
Let’s look closer at the legal factor.
To purchase derivatives the legal models with the creation of companies abroad are traditionally used. Why is this so? Why are derivatives not acquired by Ukrainian companies directly? Let’s take an example. A Ukrainian agrarian wants to insure against falling grain prices and decides to buy an option. This option is issued, for example, by a European bank.
There is already a problem at this stage. A license for investment abroad is required. Derivatives are both a contract and a security by their nature. The purchase of securities abroad is an investment.
Article 5 of the Decree of the Cabinet of Ministers of Ukraine On the System of Currency Regulation and Currency Control No.15-93 of 19 February 1993 specifies that the implementation of investments abroad, including the purchase of securities, requires a license from the NBU.
An instruction, On the Procedure of Issuing Individual Licenses for Investing Abroad, approved by the NBU Board Resolution No.122 of 16 March 1999, states that investing abroad refers to a foreign exchange transaction, which provides purchase of capital assets, intangible assets, corporate rights securities and their derivatives in exchange for currency values by investment entities for generating a profit or achieving a social effect.
Thus, the purchase of an option by a Ukrainian company to insure its price risks requires a license from the NBU.
A further limitation is that the application form for issuing such an individual license and the license itself must contain information about the specific amount of investment and its duration. The price of the option or futures contract is set to the date of the transaction and is based on the current price in the market (or stock exchange). As a result, the buyer does not know the exact value of derivatives in advance. Current Ukrainian law requires a precise knowledge of the amount of investments in the weeks prior to the transaction. If the amount changes, it is necessary to amend the existing license (if the amount of the investment is reduced), or get a new one (if the amount of the investment is increased).
This problem is unavoidable if agricultural producers want to buy the option or if the Ukrainian company is going to purchase futures on a foreign exchange (for example, in case the processor wants to buy futures to be protected against a rise in prices). It is impossible to know the exact price on the stock exchange in advance, but this is obligatory in Ukraine in order to get a license.
If we consider the derivative as the contract (as it was mentioned above on its dual nature), another issue may arise. A derivative is an obligation that may not assume the additional conclusion of delivery agreement. Besides, the derivative can exist in non-documentary (book-entry) form. In such cases, there may be practical problems in communication with the bank.
In accordance with the Regulations On the Procedure for Monitoring the Export, Import Transactions, approved by NBU Board Resolution No.136 of 24 March 1999, to credit the funds wired by non-residents to a resident’s account, banks are obliged to request a copy of the contract with a non-resident, acts and other documents supporting exports. If a derivative is made in book-entry form, the Ukrainian company will not be able to provide a copy of the contract to the bank and the customs authorities. As a result, the Ukrainian company won’t be able to receive payment for products and carry out its export.
Derivatives are effective and necessary tools for Ukrainian agribusiness. They can be used by both large agricultural holdings and medium-sized producers. Hedged price risk and guaranteed sale of products at a fixed price allow companies to plan their activity effectively. However, to enable Ukrainian agricultural companies to use these financial tools, it is necessary to substantially reform securities legislation and to change a number of provisions in Ukrainan currency legislation.
Legislation on turnover of securities in Ukraine is being actively reformed and aims to create a functioning derivatives market. This process involves the key regulators and authorities (Ministry of Agrarian Policy and Food of Ukraine, the NBU, National Securities and Stock Market Commission), as well as international donors (USAID). However, reforms and changes in legislation are a matter of time. Meanwhile, agricultural companies in Ukraine are forced to look for alternative ways to obtain legal access to international tools of improving agricultural business, and thus to use foreign companies in their structures and develop various contractual models.
Автор: Artem S. Naumov
Источник: http://www.ujbl.info/article.php?id=647