* Major traders raise profile in pre-export financing
* Basel III could lift capital requirements near 20 pct
* Glencore, Vitol already lend to producers
By Emma Farge
GENEVA, Nov 14 Major commodity traders are
replacing banks by offering trade finance directly to producers
as new liquidity requirements hobble traditional lenders,
bankers said on Wednesday.
Commodity exporters require letters of credit and other
loans to arrange for the shipment and delivery of their goods on
international spot markets.
But rising liquidity requirements under Basel III, a new set
of global rules on capital adequacy, will force banks to make
tough choices on lending to farmers, with long term pre-export
deals seen as most vulnerable.
"The investments in agriculture that will feed the world are
going to need long term investment and that's not coming from
banks and that's to do with Basel III," Rick Torken, managing
director at ABN Amro said at the Global Grains conference.
He added that bank liquidity requirements could go up by as
much as 19 percent this decade.
Andy Howell, head of soft commodities at SMBC, said major
commodity traders with deep pockets were increasingly filling
the gap left by banks by offering financing in exchange for
long-term supply contracts.
"Some of the banks are stepping back from financing the
goods at origin which traditionally we've done quite well. The
traders are much more able to go in to secure supply and they
can do that by providing the finance," he said.
The trend towards pre-export financing among traders is seen
as part of a broader shift in their business model from pure
middlemen to major integrated players.
Swiss-based Glencore is already active in lending
to metals producers while top oil trader Vitol offers
pre-financing to a crude oil producer in Kazakhstan.
A senior source at a mid-sized grains trader said that
ethanol producers and hog farmers are now seeking extended
credit terms as financing from traditional partners dries up.
Damian Honey, partner at law firm Holman Fenwick Willan,
said he had observed the growing role of commodity traders in
lending to Thailand's biomass producers.
For now, the growing role of traders in lending has not yet
attracted major scrutiny from regulators, he added.
"Regulators are a long way behind and are grappling with
other issues on regulating commodities markets," he said.
An Oct 29 report by the World Trade Organization said trade
finance growth had slowed along with growth in world trade and
although there was no overall shortage of funding, there were
tensions in Europe and parts of Latin America.
Dollar funding remained an issue outside the United States,
although the growing use of the Chinese yuan had started to
alleviate the situation.