Sunflower, known for its heliotropism (motion in response to the direction of the sun), is mostly processed into an oil with a high omega 6 fatty acids content. The crop is widely grown in the region around the Black Sea, and the future of sunflower oil industry is exposed to policies in that region.

The world leading sunflower exporters (Ukraine, Russia and Argentina) crush their production locally into meal and oil for optimal industrial capacities and reasons linked to policies (e.g. export taxes, trade agreements, etc.). Consequently, the long-term fate of crushing margins will be subject to the evolution of these policies.

As the domestic demand for quality feed compounds increases in the Black Sea region, the demand for soybean meal with nutritional properties (e.g. higher in lysine content) emerges. This puts pressure on sunflower meal sales and draws farming towards more soy.

Last but not least, hulls isolated from the seeds are frequently burnt in crushing plants to produce energy making these self-sufficient in energy. Once pelletized, these hulls find growing outlets in the EU with the development of the biomass and bioenergy markets.

Rice, a staple for half of the humanity, is for 90% produced and consumed in Asia. This crop is challenged by policies ensuring food safety and farmers income in the world’s most populated countries.

First, rice has different grades and processes varying upon the types of food in which it is consumed: parboiled rice is frequent in Indian cuisine, unlike in most Chinese and South-East Asian cuisine. This factor influences trade routes, which relate to the populations and their cooking habits (e.g. diasporas of different regions, etc.). Some products even find specific destinations, such as broken exported to Western Africa.

Rice is dominantly produced as a staple in emerging countries. For the sake of social stability, the governments concerned need to ensure food security and to find a compromise between rice affordability in urban areas and income generated in rural regions, which in some cases hold influential voting power. In order to do so, they may use a wide array of measures to regulate their markets, such as tariff and non-tariff barriers, minimum prices, support programs, state inventories, etc. The evolution of these policies and the relative price other cereals entering into food programs (primarily wheat) can influence rice prices.

On March 25, 2020, the Swiss Federal Council announced measures to help Swiss SMEs in light of the Covid-19 crisis. It is only natural that BNP Paribas in Switzerland has decided to join this program to show its support to the Swiss economy.

The program consists of two types of loans, and a client requesting support under this program must be an existing client of the Bank:

• COVID 19: up to 500K CHF, 100% secured by the Confederation (through Sociétés de Cautionnement), 0% interest rate
• COVID 19 Plus: (in addition to the Covid 19 loan), between 500K CHF and 20Mio CHF, max 10% of turnover, 85% secured by the Confederation, 15% Bank’s risk. Interest rate of 0.5% for the part covered by the Confederation.

If you are an existing client, this is how you can get support:

• Fill and sign the form “Aide transitoire COVID 19” or “Aide transitoire COVID 19 Plus” available on the following website: https://covid19.easygov.swiss/fr/
• Contact your Relationship Manager and send him/her the signed form together with requested documents.

Further information:

https://covid19.easygov.swiss/fr/ 

https://covid19.easygov.swiss/fr/banques/

https://www.admin.ch/gov/fr/accueil/documentation/communiques.msg-id-78572.html

Discover our Agribusiness expert Alain Butler’s insights on the cotton industry.

Who are the main producers of cotton? What is it mostly used for ?

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Discover our Agribusiness expert Alain Butler’s insights on the wheat industry.

Who consumes the most wheat, humans or animals? Which countries run the market?  Discover almost all you have to know on wheat.

Don’t blame the technology; the real hurdles are governance, res­ponsibilities and the ability to em­brace change.

When taking a closer look, the execution of commodity trading may appear outdated to people unfamiliar with the industry. Handling paper documents remains the basis of transac­tions, and lots of time and energy are invested in reconciling information between the par­ties or internally between various IT tools.

Within the trade finance industry, most people would agree that transacting via data only would be easier, quicker and cheaper. Avoiding redundancies of data and interfacing tools should save costs. We at last see more po­tential integration between the post-trade executions of commodity merchants and the fi­nancing of those transactions. The challenge is not about sharing a common long-term vision, but implementing the first steps to reach it.

As with social networks, blockchain projects will add value to users once many of them are interconnected. For instance, replacing the means of communication between banks for documentary credit by a blockchain solu­tion requires a minimum adoption by a pool of banks. By developing komgo, Voltron or Marco Polo in consortia, banks address this network effect requirement.

Defining the appropriate governance of such a structure is another challenge. From a re­gulatory standpoint, it must comply with competition laws. On the economic side, their business models encroach on the bank origination and distribution. Over time, we can also imagine a divergence of interests between the parties involved.

Unfortunately, the whole transaction pro­cess involving many parties cannot be digi­tised at once, so we have to start somewhere and then manage the rupture. At some point, the new processes need to be plugged into the existing ones. This raises new questions, for instance, how do you produce a paper version of the shipping documents if your client has purchased a digital set of shipping documents, but his buyer is only willing to receive a set of paper documents? Here, the idea is to define a set of rules and responsi­bilities that are new and agreed upon by the parties to manage the boundaries.

Ultimately, those digital platforms need to be interfaced with the banks’ “legacy”. The banking industry was once one of the first to be computerised and therefore their IT sys­tems beat the life expectancy of those in most industries. Considering the implementation cost of such connections, banks have to arbi­trate between its resources, the various pos­sible platforms, and the remaining shelf-life of the tools to be connected.

Rome was not built in a day and trade finance will not be digitised overnight. Embracing the agile and lean methodologies and invol­ving users within the design process of IT tools has already accelerated the time-to-market for the delivery. It has also ensured a better design through a simpler communication between users and developers. While it is critical for banks to manage their cost structure to re­main competitive in a fast evolving world, they also need to be connected to their clients. Now it is time to roll up the sleeves and start imple­menting these new platforms and adapting to new challenges on the way.

Article written by Louis-Jérôme Monnier, Origination & structuring manager agribusiness, BNP Paribas in Switzerland. Published in Agefi’s  special edition on commodities on April 2019.

From March 18^th, Ariane Dehn is appointed Head of BNP Paribas Asset Management in Switzerland.

Ariane Dehn, as Country Head Switzerland Asset Management, is responsible for distribution of active as well as passive Asset Management Solutions.

Prior to her recent appointment within BNP Paribas, she had worked since 2001 for Janus Henderson Investors in various positions in Germany and Switzerland. In her last role, she was Head of Sales Germanic Switzerland and Austria responsible for Wholesale and Institutional Clients.

She hold the degree as Qualified Insurance Specialist and certified Hedgefund Adviser.

“I am glad to join BNP Paribas Asset Management because of the strong leadership in ESG and the quality of the product range”

She will report directly to Fabien Madar, Co-Head of Distribution Europe, Head of Southern Europe in BNP Paribas Asset Management.

“I am very proud to welcome Ariane. She is bringing with her a deep knowledge of the Swiss market which is the most important ingredient to build trust with our clients”

Phase-out of fossil fuel vehicles

To meet national and international environmental targets, car manufacturers have developed alternative fuel-powered cars.

Indeed, many countries have decided to ban the sale of new fossil fuel passenger vehicles by 2030-2040: China, France, Denmark, India, the Netherlands, the United-Kingdom, Norway, and Sweden…

Some cities also signed the Fossil Fuel Free Streets Declaration, committing to ban emitting vehicles by 2030: Auckland, Barcelona, Brussels, Cape Town, Copenhagen, London, Los Angeles, Madrid, Mexico City, Milan, Paris, Rome, and Vancouver… The objective is clear: to reduce carbon emissions coming from fossil fuels – such as gasoline and diesel – that cause climate change.

In this context, three main alternatives to fossil fuel passenger vehicles have emerged: electric vehicles (EVs), fuel-cell electric vehicles (FCEVs) and biofuels.

Biofuel vehicles

Biofuels, such as ethanol or biodiesel, are alternative fuels produced directly from biomass (plants or organic wastes). In theory, biofuels are carbon neutral because the carbon dioxide that is absorbed by the plants during its life is more or less equal to the carbon dioxide that is released when the fuel is burned. In addition, biofuels are generally considered as renewable energy as the plants can regrow quickly.

In 2018, the share of biofuels in total transport fuel demand slightly exceeded 3%. Ethanol is the first alternative fuel consumed in the world. Main producers/exporters of biofuels are located in large agricultural countries (Brazil, Argentina, and Indonesia) or in countries with favorable tax treatment regarding biofuels (the US). Continental Europe is the main consumer/importer of biofuel.

Electric vehicles (EVs)

Electric vehicles represent a fast growing alternative to fossil fuel vehicles. EVs are using electricity to power an electric motor. The electricity consumed – that can be generated from a wide range of sources, including renewable sources such as solar and wind power – is stored in batteries. Today, most EVs are using lithium-ion batteries because of their high energy and power density, and long life span.

In 2018, global sales of new EVs passed two millions units (+70% more than 2017!), with around 50% of global sales in China. This acceleration is mainly due to the significant cost reductions, improved performance of batteries and government subsidies in some countries like China. Today, China, Europe and the US are leading the way with the largest stock of EVs currently in circulation.

Fuel Cell Electric Vehicles (FCEVs)

EVs can also use fuel cell, instead of a battery, to power an electric motor. The fuel cell is using oxygen from the air and compressed hydrogen to generate electricity. Converting hydrogen gas into electricity produces only water and heat as a byproduct. If produced from renewable energy (solar, wind for instance), the use of hydrogen allows to fully decarbonize mobility.

As end of 2018, the accumulated sales of fuel cell vehicles worldwide reached 10,000 units. Three FCEVs have been introduced for commercial lease and sale: the Hyundai Nexo, the Honda Clarity and the Toyota Mirai. On average, these models can be refueled in 3 to 5 minutes and feature a range of 500km (c. 300miles). These aspects are widely acclaimed by consumers. However, to develop further the use of FCEVs, infrastructures are key: more hydrogen refueling stations are needed. It is the main challenge today.

Accelerate the use of alternative fuel-powered cars

The alternatives introduced above will definitely help to decarbonize – at least partially – car mobility. There is a long way to go, but progresses have been made and the pace will accelerate driven by regulation and consumer demand. Given its key role in commodity finance, BNP Paribas can contribute to this acceleration by financing the entire biofuel value-chain (from production to distribution), the components of the lithium-ion batteries (lithium, cobalt, manganese, nickel, and graphite) and by accelerating the development of hydrogen as an energy carrier.