As a new buyer getting into the world of ingredients and commodities, it can be tough. There are a ton of things to learn and a fairly steep learning curve if you don’t have any prior experience. My goal is to take some of that confusion away. I plan to do that by starting a […]
This article is the second post in a series titled, Fundamentals of Grain Hedging: Options. In this series, I discuss different types of hedge strategies that are used around the industry by grain producers and consumers. The focus of this article is grain hedging options. In subsequent posts I will discuss more complex structures such […]
Argentina is the world’s third largest soybean producer and is incredibly important to the global oilseed trade. Unlike many other countries, Argentina does not export the beans themselves. Most of the Argentina soybean production is exported as meal and other byproducts, as can be seen in the chart below. From a crop production perspective, Argentina […]
Generally speaking, there are two different types of commodities in the world – those that are seasonally produced and those that are continually produced. The differences between the two types of commodities have major impacts on the way that you analyze the supply and demand to determine fair value. Likewise, the metrics used to discuss […]
It is not uncommon to hear people in the hedging space to say things like, “even a blind squirrel finds a nut every now and then,” or “it’s better to be lucky than good.” The problem with those statements are that they are usually indicative of a lack of grain hedging strategies. You see, those […]
This post is the start of a series discussing different grain hedging strategies that are utilized by grain producers and consumers. In the grain markets, there are a number of different grain futures contracts. Most of these contracts are traded on a few exchanges and almost all the futures exchanges are owned by the Chicago […]
Even the best laid plans have the ability to go awry. This is especially true in commodity markets that are known to be volatile and have a history of taking no prisoners. That’s why it is critically important that every business has plans and processes in place to protect them against hedges going awry. Consider […]
Successful commodity risk management at consumer-packaged goods companies (CPG) tends to focus primarily on protecting margin while removing volatility, providing margin recovery, and providing predictability to the business. The way that this is traditionally accomplished is to align the companies hedging strategies and tools with brand elasticities and market conditions. This allows organizations to repeatably […]
The problem with most risk management and hedging programs today is that there is a lack of a defined process. Too many producers and consumers are either trying to buy the absolute top/bottom, getting nervous and buying/selling on impulses, or simply buying to a budget. From a risk management perspective, all of these strategies will […]
US corn is primarily grown in the Midwestern region of the country, or the central states, where the soil is rich, deep, and the summers are ideal for growing the grain. Within that midwest region there is actually two different subsets of areas for corn growth – the Eastern Corn Belt (ECB) and the Western […]