Commodity Hedging – Asian Agricultural Business

Client Brief

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.

PMC Solutions
  • 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.