* Cost of finance increases in line with greater risk
* Finance issues could concentrate grain trade in few hands
By Sarah McFarlane
GENEVA, March 21 The crisis in Ukraine is
hurting its small grain traders as they struggle to get
financing from local banks, forcing them to seek loans from
bigger, mostly international trade houses, traders said.
Growing tensions in East-West relations over Russia's moves
to annex the Black Sea Crimea peninsula have weakened Ukraine's
hryvnia currency and its already fragile economy, leading its
banks to cut back on lending.
Grain exports have been maintained in Ukraine, which is
forecast to be the world's second-largest grain exporter in
2013/14 behind the United States.
But its traders are scrambling to find funding, and their
borrowing costs are rising. They could ultimately lose market
share to the bigger houses.
"We are doing some financing for some players, but it's
based on strong relationships, and clearly there's a lot more
risk today," a trader at an international commodities trade
One trader specialising in Ukrainian grains estimated that
trade houses were charging 7 to 11 percent per annum for
dollar-denominated 30-to-40-day loans, up from 5 to 8 percent
paid to local banks before the crisis.
"We have clients who are not able to pay, so we have to find
a solution. We are partly financing our buyers," the Ukraine
"But there's not so many like us who can afford financing."
It's not unusual for larger trade houses to selectively
provide limited financing to smaller traders, but the reduced
availability of bank finance has driven up this activity.
"Traders will lend very much on a case-by-case basis," a
European grain trader said.
Some traders said that financing issues could concentrate
grain trade in the hands of the strongest trade houses.
"I think the people involved in this business with strong
financial resources and good cash flow, they will gain market
share over weaker smaller companies who don't have the credit
lines, the trade financing," said Hans Stoldt, director at trade
For the current campaign to end-June 2014, around 4 million
tonnes of corn remains to be shipped, which will require export
"I would not be surprised if a number of banks raised their
prices (for the cost of financing exports), (and) I would not
exclude that we would do that," said Karel Valken, global head
of trade and commodity finance at Rabobank.
But most traders said their focus now is turning to the
Farmers are now planting crops for the coming season and
need financing to buy seed and fertiliser. Later in the season,
they will need funding for pesticides, fuel and labour for
harvesting and for exports.
In the worst case, Ukraine's coming corn crop could drop by
a third to 20 million tonnes as the crisis prompts banks to
raise lending costs and reduce their exposure, traders and
analysts have said.
(editing by Jane Baird)