Slow Wine 2024
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Modify the Basel agreements: they penalize farmers, who follow the rhythms of nature

The wine supply chain from the Chianti Consortium Forum: the credit system also pays. Cooperatives: different parameters for our businesses
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The difficulties of access to credit for viticulture

The rules for access to bank credit under the Basel Accords penalize farmers and must be changed in light of the specificity of agricultural activity. This is the call coming from the Forum on Credit in Agriculture - “The Basel Accords: the urgency to change” - promoted and organized by the Chianti Consortium, in collaboration with Alleanza delle Cooperative Italiane Agroalimentare, Cia, Coldiretti and Confagricoltura, staged today in Rome (Sala del Cenacolo of the Chamber of Deputies), with numerous representatives of the political world and the agricultural sector, to take stock of the implementation of the Basel Accords.

According to the Basel Accords, agricultural companies can access bank credit under the same rules that apply to all other sectors. However, this penalizes them considerably, because their business, by its nature, is very different from all others. The agricultural system, in fact, has to submit to the rhythms of nature, consequently the production and sales cycles are much slower than any other activity, and today, with the current arrangements, farmers are penalized when they go to banks for credit. This situation is detrimental not only to the farmer, but also to the credit system.

To give an example, if a bank lends 10,000 euros to a farmer to make a vineyard, demanding repayment after 3 years, that's when the farmer gets in trouble, because the first bottle of wine produced from that vineyard will be sold in at least 5 years. And this situation goes to the disadvantage not only of the farmer, who does not know how to repay the credit, but also of the banking system, which will not have the money back in the required time. The production cycles, in the wine world, are very long, and so the rules, which everyone wants to respect, must be adapted to this context, especially since the possibility of having access to credit is now more crucial than ever for wine companies. In the post-pandemic, with rising inflation and rising commodity costs, it has become most important to have clear and appropriate rules to access funds and center economic recovery.

For this reason, the Forum on Credit in Agriculture called for agriculture to have a system of banking rules that is completely different from other sectors: not because it wants to be privileged, but because the life cycle of plants is different from any other production: either we change the rules for farmers, is the conclusion, or the sector will stay out of the Basel agreements.

From the cooperative front, it is the president of Alleanza delle Cooperative Agroalimentari, Carlo Piccinini, who launches an appeal: “Italian credit institutions must become more aware of the specificities of cooperative enterprises so that they are not excessively penalized in the provision of credit. Access to credit”, Piccinini explained, “is still a major critical issue for cooperatives, especially small ones. The balance sheets of a cooperative enterprise are in fact closed at breakeven, without the realization of profits, since it is not the purpose of profit that distinguishes cooperative societies. Yet, that of profits is precisely the parameter used by lending institutions to assess creditworthiness. The level of capitalization also becomes increasingly important to lending institutions, in terms of guaranteeing the repayment of credit disbursed, but cooperatives have modest levels of capitalization, and the shares of capital subscribed and paid up by members do not reach levels comparable with those of for-profit companies. All this results in an objective difficulty in interpreting cooperative financial statements”.

Since the method of financial statement analysis used by banks “does not capture the centrality of valuing the mutualistic exchange with members”, Piccinini called for the possibility that regulatory changes be introduced to identify other items within the financial statements that would guarantee the evaluator of the good and proper management of the cooperative enterprise. “It is also desirable”, Piccinini concluded, “to work on ESG parameters, which are already binding today in relations between credit institutions, and which could remedy the obstacles in access to credit by cooperatives: in fact, the cooperative enterprise responds by its very nature to the ESG taxonomy, since it is connoted for being a creator of the socio-economic development of territories and communities in a perspective of widespread and sustainable well-being”.

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