The Ministry for Development of Economy of Ukraine set proposal of memorandum as to forward contracts execution

Source

APK-Inform

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The Ministry for Development of Economy, Trade and Agriculture of Ukraine offers to relevant associations of Ukrainian grain market a middle ground of sorting out the problem of possible failure of forward contracts execution for agricultural products delivery by Ukrainian farmers. That was stated during the meeting on this problem in the Ministry on October 28.

All interested parties were offered to analyze a variant of the corresponding memorandum announced by Ukrainian Agri Council.

“The aim of the memorandum is to agree the main principles and mechanisms of cooperation between parties in frames of restructuring procedure of grain market entities’ obligations for forward contracts /contract of delivery of agricultural products determined by the Memorandum”, - was stated in the document.

The Memorandum determines that the restructuring of obligations under the forward contracts should be implemented with mutual agreement of the parties as:

  • reduction of amount of agricultural producers’ obligations for delivery of grain or oilseed crops as a percentage of crop loss volume that is confirmed by corresponding act and return of payment received (advance instalment) by agricultural producers for undelivered product in case they got the payment;
  • adjustment of delivery terms under a forward contract with their possible delay for the next season as regards a delivery of volume of crop lost;
  • other ways agreed by parties of a forward contract.

Moreover, the Memorandum determines that the proper evidence of crop loss by a farmer is a report of inspection and charge-off of the crop lost made in no particular form and approved by the commission that includes representatives of state body or local governance, or a certificate of weather conditions resulted in drought or flood issued by a regional office of the State Emergency Service of Ukraine.

The restructuring of obligations under the forward contract should be done by conclusion of an amendment.

If parties do not reach a mutual agreement regarding a form of the restructuring, it would be done as “reduction of amount of agricultural producers’ obligations for delivery of grain or oilseed crops as a percentage of crop loss volume”.

If accepted, the Memorandum would be effective upon execution and act until July 1, 2021.

The next meeting on this issue to be held on November 2.

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