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In recent days, the industry media reports that some agricultural associations and public figures claim about the impossibility of fulfilling forward contracts for the supply of agricultural products. At the same time, farmers refer to the drought presented by them as force majeure. Moreover, there are calls for the Government to create mechanisms for mass non-performance of forward contracts.<\/p>\n
The European Business Association urges market participants not to resort to speculation on this issue and to prevent the disruption of contractual relations in the market. Although this year’s weather conditions have had a negative impact on the yield of a number of oilseeds and cereals in some regions of Ukraine, we still have the third record corn harvest and the fourth record sunflower harvest since Ukraine\u2019s independence. Accordingly, there are no preconditions for mass non-performance of contracts in the agricultural market. Inflating the situation around the harvest in the public sphere is used as a mechanism for non-performance of forward contracts. Although the real reason behind was the increase in prices for grain and oilseeds in international markets.<\/p>\n
The EBA experts are convinced that such rhetoric can lead to the destruction of the forward procurement market, mass disruption of contracts not only with traders but also with flour mills and vegetable oil producers, which will lead to price and legal chaos in the market, as well as problems with a number of food products.<\/p>\n
The mechanism of forward agreements gives farmers access to financing, insurance, cheaper lending, sowing, fertilizers at the most important moment of preparation for the new harvest. Moreover, forward contracts create a mechanism for the farmer to insure the risks of price volatility in case of its fall. This global practice ensures the stability and predictability of the production cycle for agriculture and processing enterprises.<\/p>\n
Failure to comply with local grain supply contracts will lower the credit rating of businesses to domestic creditors, and default on international export contracts will significantly worsen Ukraine\u2019s investment climate for agribusiness and our country\u2019s reputation as a reliable supplier of grain to world markets.<\/p>\n\t
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