In 2014, Belinsky was one of six entrepreneurs who volunteered to test the new Syngenta service — the Forward Plus Program. Cooperation terms were simple: a farmer had to buy chemicals and seeds from the company on credit, and pay it off with part of his future harvest. Prices were fixed at the time of signing the contract according to corn futures quotes on Chicago Mercantile Exchange. “So, if the market price fell, I would sell my corn at a better price. If the price of corn in Chicago grew, I might fix higher prices in the contract”, says Belinsky.
Insurance was not in vain. Good weather in the USA allowed local farmers to collect a record harvest of this crop — 24 million tons more than last year. Such a yield of the world’s largest supplier led to a sharp decline in corn price; corn futures quotes in Chicago fell by $40. “Needless to say what it felt like. I knew that I would sell my crop at a much higher price”, Belinsky recalls with pleasure.
However, there were still three months till harvesting time. Agritel International consulting company, Syngenta’s partner, was watching corn ripening to avoid surprises. According to Yuri Ruban, senior consultant at Agritel International, the company’s experts controlled everything that could affect the yield and its cost — from weather conditions to the situation on world markets.
Such fine tuning of the business paid off. In October, when prices in Chicago froze at $140 per ton, Belinsky sold 3,000 tons of corn to Syngenta for $180. Only the price difference brought the farmer $166,000. Under the terms of the contract, Belinsky received one half of the amount in money, and the second half — in Syngenta’s seeds and chemicals. “I might wait for the spring and sell my crop at even higher prices. But each farm needs money for operational activities, and the deal justified itself”, says Belinsky.
Belinsky’s example became the best advertisement for a new Syngenta project. According to Khrypko, this year 20 agricultural companies are working on forward contract with Syngenta. Intuition did not disappoint Ukrainian farmers. Continued drought in the US led to talks about reducing the yield of corn. In July 2015, pushed by such forecasts, the price of corn on the Chicago Mercantile Exchange rose by $20. “The surge of quotations was expected, and we used this for a signing a contract”, says Ekaterina Konaschuk, Vice President of Commerce at AgroGeneration international company. Her company entered into two forward contracts with Syngenta to sell corn at a fixed price. The company has committed to sell 2,000 tons of corn for $160 per ton, and this fall global price fell to $145. The earnings on the difference in prices were $30,000.Syngenta plans to enhance their project. Khrypko says that this year the participants of Forward Plus Program will be able to take advantage of agricultural receipts, legalized in Ukraine this spring. The new tool allows borrowing and selling crops before harvesting. Besides, such loans may be returned not only in products, but also in money. A significant advantage of agricultural receipts is the possibility to sell them to third parties prior to the date of repayment.
Six farmers already agreed to test the new lending scheme, including AgroGeneration. “We will continue our cooperation with Syngenta, because it is really beneficial”, says Konaschuk.
Теxт: Maxim Birovash