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Help to manage ups and downs

Market Risk Management

Fluctuations in commodity prices, currencies and interest rates can make a big difference to your end of year results. Our specialist team can work directly with you to help protect your business and give you the confidence to plan ahead.

How we can help

The wheat farmer

Australian producers have always been well aware of the impact of overseas markets and external influences on local agricultural prices and input costs. You want to safeguard your business from commodity price fluctuation. So you decide to fix the price of 1,000 tonnes of expected production for your new crop.

The Importer

You've bought machinery from Europe and need to pay 100,000 Euros in three month's time. That's all good with today's exchange rate, but you're worried the Aussie dollar may depreciate against the Euro in the coming weeks, driving up the cost of the equipment.

 

Foreign exchange risk management

Manage your international exposure

Ups and downs in the currency market can affect your import payments and export receipts. Here are some products you can use to minimise your risk.

Spot foreign exchange

This is simply an agreement to buy or sell one currency in exchange for another. You settle the contract immediately, at a price based on the current exchange rate ('spot').

FECs

Forward Foreign Exchange Contracts, also known as FECs, these let you set an exchange rate that you can use for foreign currency requirements on a specific future date. So whatever happens to the exchange rate you’ll know your income or cost in Australian dollars.

Pros

  • With a known exchange rate you can budget and plan ahead
  • The expiry of the FEC can match the cash flow of the transaction

Cons

  • You can’t take advantage of better rates
  • These are fixed price obligations, so if a transaction doesn’t happen or production fails, you could lose when settling your FECs

Foreign currency options

These protect you if the exchange rate moves in the wrong direction over a specified time, but also let you get the benefits if the exchange rate moves in your favour.

Pros

  • With a known exchange rate you can budget and plan ahead
  • The expiry of the FEC can match the cash flow of the transaction

Cons

  • You can’t take advantage of better rates
  • These are fixed price obligations, so if a transaction doesn’t happen or production fails, you could lose when settling your FECs

Commodity risk management

We can help reduce, or even remove, the volatility and uncertainty that comes with the ups and downs of commodity prices and currency movements, so you can plan ahead and budget with greater confidence.

Order watch

(available for both FX and commodity risk management)
 

We let you set a price level for transactions then alert you when the price is right, so you don’t need to keep a constant eye on the markets.

‘Over the counter’ commodity products

 

These are tailored to your needs and are cash settled. If you’re a medium to large producer, they can help you manage price risk and add flexibility to your marketing programs.

Commodity price swaps and options

 

If you’re a producer or purchaser of agricultural commodities:

  • Commodity price swaps allow you to fix prices for future production or accumulation needs.
  • Commodity price options protect you against unfavourable price movements but also let you take advantage of better prices, if they happen. For this flexibility, you need to pay a premium up front.

‘Over the counter’ products are offered in the following commodities:

 

CommodityMax. durationMin. individual amountReferenced toCurrency availability
WHEAT3 yrs100 MTCBOT/KCBTAU & US
CANOLA3 yrs100 MTICEAU & CA
CORN3 yrs100 MTCBOTAU & US
COTTON3 yrs100 balesICEAU & US

 

For 'over the counter’ commodity products, you should be aware of 'basis risk' that exists between the hedging instrument you’re using and the physical price of the commodity you want to protect. We strongly recommend that you seek external risk management advice from a commodity adviser before using these products.

View the Product Disclosure Statement and our Target Market Determinations.
Unless otherwise specified, the Rabobank products and services described on this website are issued only in Australia by Rabobank Australia Limited ABN 50 001 621 129 AFSL 234 700.
Consider the relevant Disclosure Documents along with your personal objectives, financial situation and needs before making any financial decisions. Fees and charges may apply.

 

Find out how our risk management team can help you