In parallel with an FX review, a financial sponsor wished to understand the commodity risks arising in an Asian farming business that buys grain for poultry feed and sells finished meat products in international and domestic markets.
- Review purchasing processes and identify pricing differences between imported and domestically sourced grain
- Analyze end product sales and highlighted pricing mismatches between these and the group’s purchasing approach
- Recommend procedures be adopted for controlling inventory and the timing of purchases, and these to reflect the operational strategy of the business
- Propose physical and derivative based approaches for mitigating grain pricing risk
Results & Recommendations
We provided a solution that ensured both management and the sponsor gained a deeper insight into the purchasing activities of the business.
We documented a new policy which delivered the group with a standardized framework of purchasing processes to mitigate commodity risk and to prevent grain price speculation.