Amius helps you manage your price risk exposure on Grain Markets

Depending on the way your cooperative or trading house works, Amius can provide different strategies for you. You will find a few examples below.

If you have any questions, or would like to hear more, please contact our team on +44 (0)207 268 7700 or email us at riskmanagement@amius.com.

 

1. Prix Ferme / Premium Contract

If you work on a Prix Ferme basis – or Premium Contract basis; you propose a price to farmers for every delivery period based on the Matif exchange settle and the cash market on that day. Farmers can sell either based on the last settlement price or fix the premium. The volume bought and collected by your commercials will be sold by your cooperative on the cash market. The Matif wheat contracts will be sold by farmers at their own discretion, via your cooperative.

There are three risks involved which we have outlined below:

  • Settlement risk (used for pricing)

Because the market can be volatile between the settlement of the previous day and the decision of the farmer; we have designed a strategy that allows you to receive extra margin when proposing this type of contract to farmers. In short – you receive a premium each day (for example €2 per ton) that allows you to feel more comfortable when selling to farmers the following day, after the market may have moved.

  • Roll of Long Position when Physical has been delivered through AA by counterparty

In the case of an Against Actual (AA) – your counterparty on the cash markets requests you to receive the physical product. As a result, if the farmers haven’t hedged (because prices are not attractive), you end up with long futures on the exchange.

In that case we can roll your long position using a strategy that allows you to sell it better than the market levels at that time.

For example: 1.5 months before expiry, you know you will have about 20,000 Tons to roll from a December to March contract on the exchange. The spread Matif December / Matif March currently trades at -8.

With this strategy you would be able to get extra value by rolling it at -6.50, for example. On a 20,000 Mt volume you save €30,000 which corresponds to a 1.5 improvement on the spread of 20,000 Mt.

For a full description of the trade please contact our sales team.

  • Cash premium to hedge

It is unfortunately difficult to hedge the cash premium on listed markets at the moment.

 

2. Prix De Campagne / Pool Sales

You work on the basis of Prix de Campagne/Pool Sales, meaning you manage the price risk for your clients and try to beat the weighted average of Matif prices (during the whole year). The Farmer gives up the volume to sell to the cooperatives. You manage this position during the whole year trying the beat the average of the market. The farmers only know their final selling price at the end of the commercial year.

We usually work in two steps with our clients:

  • 1st Step: Protect the minimum price and finance it

First of all, we work with our clients to fix a minimum price. This minimum price is usually paid at the beginning of the commercial year by the cooperative to the farmers. In that case, whatever happens the farmers are guaranteed to receive this minimum price for their crops.

Here we work with cooperatives to optimise their hedging strategy to achieve the best minimum price possible depending on their financing requirements.

As we know this time of year requires a lot of funding; we also provide financing to help cooperatives manage this minimum price fixation.

  • 2nd Step: Optimise the selling price and beat the average

In this phase we work with cooperatives to optimise their selling price and beat their competitors. Depending on your risk appetite, we will offer you a wide range of products – from simple forwards, to more complex strategies (combines forwards and options). Our sales team will provide information based on our expertise of the market (both technical and fundamental analysis), combined with our access to our diverse base of clients through our Singapore, London and Sao Paulo offices. We know we can bring tremendous added value to your business. Our objective is to help you beat your competitors and get a better average price for your farmers at the end of the commercial year.

 

3. Additional Services provided by Amius

  • Currency/ FX Exposure

Regardless of how you work with your clients, you will have a currency exposure (for example; EUR/USD, AUD/EUR, AUD/USD, CAD/USD). Amius helps you manage this currency exposure and will propose strategies to hedge it for you. Please contact our sales team for more information.

  • Gasoil/Electricity

Many of our clients consume gasoil or electricity in high quantities.  As we know it can represent a significant cost for them at the end of the year, we propose strategies and ideas for them to hedge this exposure. Our objective is to help our clients generate more margin, opening up opportunities to rise above their competitors.

  • Correlation with other markets

Some grains markets are not easy to hedge. In order to help our clients as much as possible with their exposure, we are happy to provide correlation studies so they can identify which market is more appropriate to hedge their exposure.

For more information about our additional services, please contact the Amius team on +44 (0)207 268 7700 or email us at riskmanagement@amius.com.