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Business supports the improved mechanism of agricultural receipts

18/ 05/ 2021
  The market for agricultural receipts has been developing dynamically over the last five years. The agricultural receipt is a simple and easy tool as it enables access to finance from a bailout of the future harvests tied to specific plots of land. Moreover, registration in the single electronic Register ensures transparency and proper protection of creditors rights. For example, in five years, agricultural receipts have allowed more than 4,000 Ukrainian agricultural producers to attract more than $ 1.5 billion in financing. There is a demand for agricultural receipts, but legal restrictions prevent the full development of this mechanism. Last year, following discussions with the market participants, it was proposed to improve agricultural receipts through legislative changes under draft Law № 2805-D on the functioning and circulation of agricultural receipts. First of all, the draft law provides for simplification and reduction of the cost of this tool, automation of operations related to agricultural receipts, and diversification into new segments of the agricultural sector. The grain business community particularly welcomes the following legislative changes proposed by this draft law: Elimination of third party’s liability for the purchase of products that are likely to be considered as the bail under agricultural receipts. Such a proposal is understandable for the business community, as there is currently no effective mechanism for identifying and separating part of the bailed grain from the total volume of the commodity (given that it is a product that is characterized only by generic characteristics); Elimination of the collision of norms in the current legislation concerning the 7-day term for compulsory performance of obligations under the agricultural receipt according to Law No. 5479-VI “On agrarian receipts” from November 6, 2012, and the 30-day term according to Law No. 1255-IV On securing creditors claims and registration of encumbrances of November 18, 2003. The abovementioned norms are the reasons for traders’ moderate use of agricultural receipts in ensuring their advance to agricultural producers, and the grain sector’s general cautiousness about purchasing grain from agricultural producers who work with receipts. Irina Dushnik. EBA Grain and Oilseed Committee Executive Director. There is annual growth in the demand for tools to sell future crops among farmers, as well as their interest in advances to attract additional funds to the farm. We hope that if the current legislation is improved, the use of agricultural receipts will not only increase the funding of agricultural producers by local and international traders but also solve the existing bottlenecks in the sale of products carried out by agricultural producers who work with receipts.   Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

The market for agricultural receipts has been developing dynamically over the last five years. The agricultural receipt is a simple and easy tool as it enables access to finance from a bailout of the future harvests tied to specific plots of land. Moreover, registration in the single electronic Register ensures transparency and proper protection of creditors’ rights. For example, in five years, agricultural receipts have allowed more than 4,000 Ukrainian agricultural producers to attract more than $ 1.5 billion in financing.

There is a demand for agricultural receipts, but legal restrictions prevent the full development of this mechanism. Last year, following discussions with the market participants, it was proposed to improve agricultural receipts through legislative changes under draft Law № 2805-D on the functioning and circulation of agricultural receipts. First of all, the draft law provides for simplification and reduction of the cost of this tool, automation of operations related to agricultural receipts, and diversification into new segments of the agricultural sector.

The grain business community particularly welcomes the following legislative changes proposed by this draft law:

  • Elimination of third party’s liability for the purchase of products that are likely to be considered as the bail under agricultural receipts. Such a proposal is understandable for the business community, as there is currently no effective mechanism for identifying and separating part of the bailed grain from the total volume of the commodity (given that it is a product that is characterized only by generic characteristics);
  • Elimination of the collision of norms in the current legislation concerning the 7-day term for compulsory performance of obligations under the agricultural receipt according to Law No. 5479-VI “On agrarian receipts” from November 6, 2012, and the 30-day term according to Law No. 1255-IV ” On securing creditors’ claims and registration of encumbrances of November 18, 2003.

The abovementioned norms are the reasons for traders’ moderate use of agricultural receipts in ensuring their advance to agricultural producers, and the grain sector’s general cautiousness about purchasing grain from agricultural producers who work with receipts.

Irina Dushnik EBA Grain and Oilseed Committee Executive Director
There is annual growth in the demand for tools to sell future crops among farmers, as well as their interest in advances to attract additional funds to the farm. We hope that if the current legislation is improved, the use of agricultural receipts will not only increase the funding of agricultural producers by local and international traders but also solve the existing "bottlenecks" in the sale of products carried out by agricultural producers who work with receipts.

 

Be the first to learn about the latest EBA news with our Telegram-channel EBAUkraine.

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