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Managing Food Industry Business and Financial Risks with Commodity-Linked Credit Instruments

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  • Turvey, Calum G.

Abstract

This paper reviews the use and structure of commodity-linked credit instruments. It is argued that in the absence of contingent markets food firms face increasing financial risk reduced investment, and limited access to debt markets. One strategy is to issue commodity-linked credit whose payment structure is linked to the price of an underlying commodity. In some cases, a commodity-linked bond (CLB) can be structured to provide an incentive to investors by sharing in profit gains. If the goal is to hedge financial risks, CLB's can also be constructed that reduce the loan principle or coupons depending on price movements.

Suggested Citation

  • Turvey, Calum G., 2005. "Managing Food Industry Business and Financial Risks with Commodity-Linked Credit Instruments," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24525, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae05:24525
    DOI: 10.22004/ag.econ.24525
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    Cited by:

    1. Shee, Apurba & Turvey, Calum G., 2008. "Commodity Linked Credit: A Risk Management Instrument for the Agrarians in India," 2007 Agricultural and Rural Finance Markets in Transition, October 4-5, 2007, St. Louis, Missouri 48139, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    2. Turvey, Calum G. & Chantarat, Sommarat, 2006. "Weather-Linked Bonds," 2006 Agricultural and Rural Finance Markets in Transition, October 2-3, 2006, Washington, DC 133091, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.

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    More about this item

    Keywords

    Agribusiness; Risk and Uncertainty;

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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