Issue link: https://read.dmtmag.com/i/1515532
STiR coffee and tea 27 Reducing Risk Commodity trade finance is indispens- able in supporting this complex supply chain, ensuring the smooth flow of coffee from growers to consumers. The coffee industry heavily depends on commodity trade finance, and any reduction or disruption in financing can have severe consequences. Banks extending credit to coffee indus- try participants face credit risk. If borrowers default on their loans, banks can incur loss- es. Reducing financing may increase banks' credit risk, particularly in times of economic uncertainty or price volatility. Without adequate risk management through financing tools like hedging, cof- fee industry stakeholders may face sig- nificant losses due to price volatility. This could affect trade firms' profitability and ability to repay loans. Insufficient financing can disrupt the coffee supply chain. Growers may struggle to fund their operations, leading to lower coffee production and potential shortages in the market. Reduced financ- ing could impact the competitiveness of coffee trade firms in the global market. Access to financing allows firms to ex- pand, invest in technology, and explore new markets. The decisions of banks to exit or re- duce their involvement in the commodity trade finance business can be influenced by a range of factors, including changes in regulatory requirements, reputational risks, and the financial performance of their commodity-related operations. Banks may also exit certain market seg- ments while offering other commodity finance services. The commodity finance landscape evolves, with new players or existing banks adjusting their strategies in re- sponse to changing market dynamics and regulations. It is not surprising, then, that there has been some belt-tightening in the credit arena in the current market en- vironment that can harm the coffee trade and ultimately hurt coffee producers as the first link in the global value chain. Judith Ganes is the President of J Ganes Consulting. Her consultancy offers subscription- based research on soft commodities and work- shops and other advisory services to the coffee, sugar, cocoa, cotton, and FCOJ industries. She specializes in futures/options price risk manage- ment. www.jganesconsulting.com www.haelssen-lyon.com More than 140 years ago, we set ourselves on an ever accelerating course that has kept us at the forefront of the global marketplace. We have con- tinually delivered a vast diversity of teas, fruits, herbs and their extracts, produced and refined in-house. Offering our customers the convenience of a one-stop-shop broadens our scope of innovative product develop- ment and turnkey manufacturing, from customized recipes to the package on store shelves. The sound base of all our activities is the safe and reliable sourcing of raw materials. We set the bar no lower than the very highest quality control standards, supervised by the most experienced tea experts. Thanks to all this, we have become what we've always endeavored to be: the leading quality partner for quality brands. DYNAMICS Something special we can add to your tea business: