The opportunities and challenges of combined use of futures commodity exchange and public warehouse in the crop sector of Vietnam

Abstract

PURPOSE: This study suggests introducing two new institutions in Vietnam, the Public Warehouse, and the Commodity Exchange. Based on these institutes, recommends three commodity-financing methods for financing agricultural commodities, the classical public warehousing-based Lombard financing, the combined version of this with commodity exchange futures and a special ‘Trading House’ based commodity financing.

DESIGN/METHODOLOGY/APPROACH: The study is based on nine-year-long history of connection building, lecturing and examinations of Vietnamese and international sources, furthermore, based on primary research in acquiring direct information from several academic and nonacademic experts and prestigious market participants on the examined market.

FINDINGS: In the case study the authors examined and presented the reflects to an efficient pattern that can be applied for other sectors and adopted by other developing countries. The establishment of an integrated financing model in vertical integration / supply systems can generate a win-win type of co-operation for all the stakeholders.

PRACTICAL IMPLICATIONS: The combined use the functions of these institutions could help grain market participants, such as producers, manufactures, traders, and financiers for convenient business decisions, price, and credit risk management, and able to involve extra financing resources to the Vietnamese agriculture in a great extent. Beyond market participants advantages, these solutions can help to reach market regulation and stockpiling strategy goals for Vietnamese Government.

ORIGINALITY/VALUE: The proposed techniques offer relatively new solutions but could contribute to the further development of these fields while these methods can eventually be used in other sectors of the Vietnamese economy as well.