Agricultural product bonds
CPRs are used to fund transactions in the agribusiness. According to Article 2 of Law No. 8.929/94 (LEI 8.929, DE 22 DE AGOSTO DE 1994 – Cédula de Produto Rural), only agricultural producers, their associations and cooperatives can issue CPRs and are negotiable on the secondary market.
There are two types of CPR:
Physical CPR: The settlement takes place when the product is physically delivered. The CPR defines the quantity, place and date of the product delivery. The contractual conditions can be adapted by mutual agreement between the contracting parties.
Financial CPR (CPRF): Settlement occurs through the transfer of funds from the issuer to the buyer on the bond’s maturity date. The settlement amount is based on the specifications set out in the contract. In general, CPRs take into account the selling price of the agricultural product on the settlement day.
There are also financial CPRs, the amount to be paid of which is defined at the time of issue (fixed price CPRF) or is linked to future commodity prices or a futures exchange, specifically the BM&FBOVESPA.
The law allows CPRs to have several types of guarantees. The most common are fiduciary collateral and pledging of crops, herds and / or farm implements and equipment. Some CPRs are secured by bank bonds or insurance policies. Because of the high cost of bank guarantees, most CPRs are secured by bonds issued by the farmers themselves.
In order to be traded on the secondary market, CPRs must be registered with a custodial institution, in particular the Cetip clearing house. CPRs are registered according to the physical volume of the product to which they relate, but do not indicate the financial value of the transaction. The average running times of CPRs are short, as they are billed at the next harvest, unless otherwise agreed.
We at “VALIA Brazil” have the appropriate network of agricultural producers and a team of highly specialized experts who can advise you and help you to solve the most diverse and complex challenges of the agribusiness sector in constant development.
