Commodity Inventory Financing - An Australian Experience Storey...Commodity Inventory Financing - An...

Commodity Inventory Financing - An Australian Experience Ron Storey

NZX Australian Agribusiness

1 © Copyright NZX Ltd. 2014

Agenda

• Clear Grain Exchange – what it does, how it works

• How banks can hold title, fund the inventory, and

transfer ownership at client’s call

• Critical nature of warehouse and collateral

managers

7 August 2013 © Copyright NZX Ltd. 2013 2

Declaration -- NZX Limited

NZX in Australia NZX Stock Exchange

Clear Grain Exchange – What is it?

online exchange to transact physical grain anonymously (buy

direct from farmer without dealing with the farmer)

secure and automated settlement facility

All on standard GTA contract terms, quality & weight certs, etc

Site specific, firm bid/offer

Scalable platform for 000’s of growers to DIY trade execution

Has transacted over 2.5 million tonnes

Trade2Trade volumes growing

11 March 2014 © Copyright NZX Ltd. 2014 4

5 11 March 2014 © Copyright NZX Ltd. 2014

Clear Grain Exchange – Standard Settlement Facility

• Provides payment security to sellers to reduce counterparty risk

• Provides ownership (performance) security to buyers

• Custodian facility to eliminate CGX (NZX Limited) counterparty risk

• Title and funds exchanged to either party simultaneously

• Buyer pay within 5 Business Days – T+5

• Seller receives funds within 7 Business Days – T+7

• CGX has now transacted over AUD$750 Million of grain


1. Buyer places Bid, bid alert system notifies grower/seller

2. Grower/Seller Places Offer on Clear

Graincorp

Seller

Buyer

2. Offer

1. Bid


3. Bid and Offer matched, trade occurs instantly

4. Buyer and Seller notified via email

4. Trade notice sent


3.Trade

Graincorp

Seller

Buyer

2. Offer

1. Bid


5. Title to the grain is held in trust by Custodian

(Perpetual) on behalf of the seller



5. Perpetual

3.Trade

Graincorp

Seller

Buyer

2. Offer

1. Bid


6. Buyer pays into the Perpetual account T+5



6. Buyer Pays T+5

5. Perpetual

3.Trade

Graincorp

Seller

Buyer

2. Offer

1. Bid


Upon cleared funds being received….

7. Title to the grain is transferred to the buyer

8. Payment is made to the seller



8. Seller Receives Funds

7. Buyer Transferred Title 6. Buyer Pays T+5

5. Perpetual

3.Trade

Graincorp

Seller

Buyer

2. Offer

1. Bid


Clear Grain Exchange – Inventory Financed Facility

• Retains payment security to sellers

• Provides title (performance) security to banks and buyers

• Bank pays CGX in standard T + 5

• Bank holds title, issues buyer forward contract for x-days with interest

• At x-days buyer pays bank and receives title

• Seller still receives funds within T + 7

CGX’s new Inventory Financed Facility suits buyers who see 5-day

terms as a constraint, and frees up working capital


Bank



6. Bank Pays T+5

5. Perpetual

3.Trade

Graincorp

Seller

Buyer

2. Offer

1. Bid

6. Bank pays into the Perpetual account T+5


Bank




7. Bank Transferred Title 6. Bank Pays T+5

5. Perpetual

3.Trade

Graincorp

Seller

Buyer

2. Offer

1. Bid

Upon cleared funds being received, T+5….

7. Title to the grain is transferred to the bank

8. Payment is made to the seller


Bank

9. Bank transfers title




7. Bank Transferred Title 6. Bank Pays T+5

5. Perpetual

3.Trade

Graincorp

Seller

Buyer

2. Offer

1. Bid

9. At x-days, client pays bank ; Bank transfers

title to the buyer

CGX Value proposition


Value add to Grower customers

Value add to Trading customers

• Ability for growers to set their own offer price

• Ability to view and match firm bids

• Secure settlement facility reducing counterparty risk

• Variable cost accumulation tool (no fixed costs)

• Ability to view and match firm offers for quick accumulation

• Ability to transact anonymously with growers and other traders

• Inventory financing option via banks

Attracting grain into BHC customers

• CGX creates a ‘market at silo’ that increases transparency and

competition for grain

2014/15 Outlook?

- New Forward contract

- Expansion into South and West Australia


The Growth Story of Online Trading on the East Coast

CGX Trade Metrics H4 H5 H6 H5 to H6

SOS

Change

Oct to Feb

2012

Oct to Feb

2013

Oct to Feb

2014

Total No. of trades 3204 3493 3956 13%

Ave trade size 116 115 127 10%

Total Traded Volume 377,200 401,900 502,100 25%

No. of Grower sellers 1279 1183 1348 14%

No. of Trader Sellers 9 19 24 26%

Total Sellers 1288 1202 1372 14%

Total Buyers 38 49 54 10%

2013/14 BALANCE SHEET

Wht Bly Can Sor

CARRY-IN 3.5 0.5 0.2 -

PRODUCTION 26.4 9.3 3.7 1.3

TOTAL SUPPLY 29.9 9.8 3.9 1.3

DOM USAGE 6.9 3.1 0.8 0.9

EXPORTS 19.5 5.5 3.0 0.4

CARRY-OUT 3.5 WA

1.2 WA/SA

0.1 -

17

MESSAGE:

- Very tight east coast, buffer in WA/SA … so far … Black Sea?

- Watch east coast carefully for next 8 weeks??

- Contact ACF !!

“ “ Thank You

Discussion & Questions


www.cleargrain.com.au

[email protected]

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