Commodities Hedging: Minimize the Risk of Energy and Material Price Fluctuations
Manufacturing and transportation companies are often exposed to risk due to volatile commodity prices in the global marketplace. An effective commodities hedge program enables you to minimize this business risk and manage future costs of fuel, energy, metals, or other commodities that fluctuate frequently.
There are multiple benefits to implementing a commodities hedging strategy. Two of the most significant benefits are reducing earnings volatility and locking in favorable costs for the future. By entering into an interest rate swap agreement, companies can lock in a fixed commodity price over set periods, despite ever-changing market prices.
Examples of Clients That Benefit From Commodity Hedging (Among Others):
- Airlines locking in current jet-fuel prices for future deliveries
- Food manufacturers mitigating the risk of rising crop prices
- An air conditioner manufacturer establishing a fixed price for future copper deliveries
Free Consultation: Commodities Hedging
Clients in a wide range of industries trust DerivGroup to help implement hedge programs for direct purchases or sales of a commodity, such as fuel or precious metals. DerivGroup also helps in hedging the cost of raw materials whose price is a function of another commodity, such as plastics. In particular, DerivGroup has extensive hedging experience in:
- Fuel and energy
- Precious metals
- Petroleum-based raw materials
In addition to recommending and executing a suitable commodities hedging strategy, DerivGroup adds value with a range of hedge accounting and valuation services associated with the hedge.
Additionally, DerivGroup relieves the burden of complex reporting standards by supplying all necessary documentation and data, including: initial hedge designation, hedge inception documentation, effectiveness testing, ongoing journal entries, shock analyses, sensitivity analyses, and more.
Contact DerivGroup today to learn how we can provide a comprehensive commodities hedging solution to meet your unique needs.
DerivGroup is an independent financial advisor serving the corporate, non-profit, tax-exempt and municipal debt markets. DerivGroup helps implement the right hedge structure for you, at the right price, with the best terms.