How can depositors and Warehouse Receipt holders mitigate marketing risks?
A. Where auction market exist, their existence minimises the risk that collateralised commodity can not be sold and makes it unnecessary for off-take contracts to be a requirement for financing against the coffee receipts. Banks can be further protected against default risk by a system under which Commodity Bodies route payments for collateralised coffee through the accounts of the financing bank. Banks, however, need to be encouraged to constantly monitor developments on the auction market and to advise their clients as appropriate. This will form part of the planned training for bankers.
