Agri credit with physical collateral and managed price risk
The collateral has a daily quote. The transaction's LTV does not.
In agri credit backed by CPR and physical grain, LTV is marked to market with regional basis throughout the season — not just estimated at origination. The loan is originated with a comfortable LTV, calculated on the collateral's value on that date. The contract is signed, the pledge is registered and the deal enters the book with that ratio. The pledged commodity, however, settles daily on the exchange, and the farmer's local price drifts from the future by the basis. By the time the gap between the ratio and reality becomes visible, the loan is usually already past due, and provisioning responds to the event rather than the exposure.
Get in TouchHow the exposure works
- LTV is calculated at origination and rarely remarked, so deteriorating coverage is only noticed once the loan is already in default.
- Regional basis is left out of the valuation, even though it defines the price actually realised where the collateral sits.
- Provisioning responds to the event rather than the exposure, leaving the committee discussing losses already incurred.
How delegated management works
| Module | What it delivers |
|---|---|
| Portfolio diagnostic | No cost: collateral marked to market, LTV adjusted by regional basis and a price shock simulation on coverage. |
| Risk governance agreement | A mandate with limits, objectives and parameters in writing, consistent with the firm's credit policy. |
| Active management | Trading the collateral's price leg through the season, with models calibrated by commodity and region. |
| Monitoring | Daily position and coverage reporting, in a format usable by the credit committee and by audit. |
What changes in portfolio risk
- LTV tracked throughout the season, not only at origination.
- Price-driven defaults separated from credit-driven defaults.
- Regional basis reflected in collateral valuation.
- Capacity to originate deals currently declined on price risk.
What stays with the firm
- Origination, the balance sheet and the farmer relationship remain entirely yours.
- Management runs under a CVM-authorised structure, within the agreed limits and with daily reporting.
- The mandate can start with a share of the book and expand as results are observed.
Hedge management track record
2.6 c$/lb
Hedge alpha
Average reduction in hedge price versus a passive futures lock.
3.5
Information Ratio
Consistency of alpha generation adjusted for tracking error.
90%
Hit rate
Accuracy of hedging decisions over an auditable historical series.
An alternative for those who prefer to manage in-house
For firms that prefer to internalise, we license the UHEDGE CTRM: daily marking, physical curves with location basis, VaR decomposed by factor and coverage deterioration alerts before maturity.
Who leads it
Rafael Lins dos Anjos, founding partner. Mechatronics Engineer from Poli-USP, with master's degrees in Economics from Insper and in Finance from London Business School. Around twenty years in global banks and commodity merchants, including Santander, Macquarie in London, Banco Pine and ED&F Man, where he headed the global OTC desk. CGA and CGE certified by ANBIMA.
See the full track recordSuggested next step
A no-cost diagnostic based on the list of live transactions with commodity, volume, region and maturity. We return the LTV marked to market, adjusted for basis, and the effect of a price shock on portfolio coverage. If the gap turns out to be immaterial, the evidence is documented for the committee and the matter is closed.
Get in TouchFrequently asked questions
What is a CPR?
A Brazilian Rural Product Note. In its financial form, the grower owes the cash equivalent of a quantity of product, which leaves the loan exposed to commodity prices.
How do you track LTV on grain collateral?
By marking collateral to market using futures and the delivery region's basis, at a frequency set in policy — not only at origination.
Can the book be hedged without changing contracts?
Yes. The hedge sits in the financial layer, with no renegotiation with the grower.
Related profiles
FIAGRO and Agri FIDC Managers
Management of the collateral's price leg, with methodology documented for the fiduciary administrator and daily reporting.
OTC Desks at Mid-Sized Banks and Securities Brokers
Your own engine to price agricultural volatility, or referral to the asset manager, to capture hedging revenue from the existing credit book.
Sources and notes
Track record: results of UHEDGE managed hedge portfolios, measured against a passive sugar futures (ICE) benchmark over an auditable historical series. The commodities fund began operations in November 2024. Calculation memo and methodology available on request.
Past performance is no guarantee of future results. Informational material only; not a public offering, an investment recommendation or a guarantee of results. Derivatives transactions involve risk of loss. The terms of each service are defined by contract.