I had the opportunity to contribute insights and review early drafts of "Innovative Agricultural Finance and Risk Management: Strengthening Food Production and Trade in the Transition Region" — a working paper published by the Food and Agriculture Organization of the United Nations (FAO) in collaboration with the European Bank for Reconstruction and Development (EBRD), prepared under their joint cooperation framework.
The paper was authored by Lamon Rutten, whose work sits at the intersection of agriculture, finance, and trade in developing and transition economies. My contribution focused on Annex 15, which examines a financial innovation I had worked on directly: the Agricultural Repo Contracts traded on the Colombian Commodity Exchange (Bolsa Mercantil de Colombia, BMC).
What Agricultural Repos Do
Agricultural repo contracts are repurchase agreements that use physical commodities — grains, coffee, oilseeds — as collateral for short-term financing. In practice, they allow farmers, traders, and processors to access working capital without having to liquidate inventory at unfavorable prices.
The key features that made the BMC model distinctive:
- Commodity-secured financing — Collateral is held in certified warehouses and managed by the exchange, giving lenders enforceable recourse without requiring land or fixed assets.
- Market-based pricing — Commodity values are marked to transparent exchange prices, reducing the information asymmetries that typically inflate the cost of agricultural credit.
- Accessible structure — Designed for small and medium producers who lack the collateral base to access traditional bank lending.
Why It Matters Beyond Colombia
The FAO/EBRD paper examined how the Colombian experience could inform similar mechanisms in Eastern Europe and Central Asia — transition economies where agricultural finance infrastructure is underdeveloped and the gap between farmers and formal capital markets remains large.
The lesson that traveled well: when commodity exchanges serve as trusted intermediaries — providing warehouse certification, price discovery, and contract enforcement — agricultural finance markets can develop faster and deeper than through bank-led credit expansion alone. The infrastructure of the exchange substitutes for the collateral and information infrastructure that borrowers in developing markets rarely have.