Commodity Risk Management
Futures – Role in Feed Market Pricing
Jaime Nolan Miralles | Commodity Risk Manager
FCStone Commodity Services Europe Ltd.
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International Assets Holding Corporation | www.intlassets.com
Commodity Risk Management
INTLFCStone Ltd
Branch registered in Ireland No. 907174
5th Floor, Portview House, Thorncastle Street, Ireland
Registered in England and Wales Company No. 5616586
Authorised and regulated by the UK Financial Conduct Authority [FRN: 446717]
In Ireland, the activities of INTL FCStone Ltd are subject to the supervision of conduct of business rules by the Central Bank
of Ireland.
The trading of derivatives such as futures, options, and swaps may not be suitable for all investors. Derivatives trading involves
substantial risk of loss, and you should fully understand those risks prior to trading. Any reference to past performance is not indicative
of future results. All references to futures/options trading are made solely on behalf of FCStone, LLC. All references to swap execution
and bi-lateral swaps are made solely on behalf of INTL FCStone Markets, LLC. FCStone, LLC will clear swaps when applicable. Swaps
are only available to eligible counterparties. All observations of economic, political and/or market conditions are not intended to refer to
any particular trading strategy, promotional element or quality of service provided by INTL FCStone Inc. and its subsidiaries and should
be construed as market commentary. All recommendations to buy or sell a specific derivative or forecasting statements regarding
market activity and the pricing thereof should be construed as a solicitation in any jurisdiction in where such an offer or solicitation
would be legal. Proper context and guidance including but not limited to the particular trading objectives, financial situations and the
needs of the intended audience were taken into consideration when this recommendation was prepared. Contact your account
representative for specific advice to meet your specific trading preferences or goals. These materials represent the opinions and
viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by INTL FCStone Inc. and its
subsidiaries. Sources of information believed to reliable were used in preparing such observations, and no guarantee or representation
regarding the accuracy of those sources has been made. INTL FCStone Inc. and its subsidiaries are not responsible for any
redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material.
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Risk Management
Futures – Role inCommodity
Feed Market Pricing
What is a Futures Contract?
An obligation to buy, sell or cash-settle a commodity that meets
set grades and standards on some future date
Futures contracts are typically exchange traded and are
standardised based on:
Commodity:
What is being traded (including grade and
quality and specifications
Contract month:
When the contract will expire (open contracts
must be delivered or cash settled)
Quantity:
The size of one contract
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Commodity
What futures contract
exist andRisk
whereManagement
do they trade?
Wheat (Matif/CME/Liffe)
Corn (Matif/CME)
Soybeans (CME)
Rapeseed (Matif)
Soybean Meal (CME)
Rapeseed Meal (Matif)
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Commodity
Risk
What does a futures
market look
like?Management
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Commodity
Risk
What does a futures
market look
like?Management
Futures contracts are
anticipatory in nature
I think Matif Wheat will
be worth €172.25 in Jan
2015
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Commodity
Futures – Why do
we care?
Risk Management
What’s the
relevance of
the Chicago
or Paris or
London
market on
Irish cereal
price
evolution?
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Commodity
Risk- Management
Let’s look at a cash
market example
France
Why do we care?
The Substitution effect
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Commodity
Risk- Management
Let’s look at a cash
market example
France
Why do we care?
The Substitution effect
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Commodity
And what of Ireland?
Risk Management
To Understand Irish Cash Wheat Price Evolution one
must understand Underlying Wheat market fundamentals
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Commodity
Risk Management
Irish Wheat Supply
& Demand Snapshot
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Irish Wheat End Commodity
Stocks
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Risk Management
Commodity
Management
Irish Wheat Physical
Cash priceRisk
history
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Commodity
Management
Irish Wheat correlation
vs. MatifRisk
Wheat
Three year correlation of 96%
13/14 correlation of 91%
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Commodity
Irish Wheat Correlation
vs. LiffeRisk
Three year correlation of 98%
13/14 correlation of 83%
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Management
Commodity
Matif Wheat Volatility
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Risk Management
Risk
Liffe Feed WheatCommodity
Wheat Volatility
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Management
Commodity
Matif Wheat Wheat
Volatility
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Risk Management
Risk
Liffe Feed WheatCommodity
Wheat Volatility
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Management
Lets reduce our Commodity
price risk!!
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Risk Management
Risk
Irish Feed WheatCommodity
Basis with Matif
Time to reduce price risk
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Management
Risk
Irish Feed WheatCommodity
Basis with Liffe
Management
Substitute flat price cash market risk for basis
risk
Reduce basis risk by understanding basis
seasonality
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Commodity
Risk
What are we trading
in Ireland??
Management
• To trade in Irish grain market means we inherently trade
international market drivers daily, the leader of which is
futures….
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•
•
•
•
Local S&D
Local Weather Market
Local logistics
Local Market environment
•
•
•
•
•
•
•
International market
International Wheat S&D
Grain & Oilseed complex
Geo-political drivers
Cash flow/Funds
International weather
Foreign Exchange
Risk–Management
Futures – Role in Commodity
feed market pricing
Knowledge is key!
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Commodity Risk Management
Jaime Nolan Miralles
Commodity Risk Manager
INTL FCStone Ltd.
5th Floor
Tel: +353 1 6349140
Portview House
Fax: +353 1 6349796
Thorncastle Street
Mob: +353857782266
Dublin 4
IM: Jaime Nolan Miralles
Ireland
Jaime.Nolan-Miralles@intlfcstone.com
http://www.intlfcstone.com/
INTL FCStone Ltd.
Branch registered in Ireland No. 907174
5th Floor, Portview House, Thorncastle Street, Ireland
Registered in England and Wa les Company No. 5616586
Authorised and regulated by the UK Financial Conduct Authority [FRN: 446717]
In Ireland, the activities of INTL FCStone Ltd are subject to the supervision of conduct of business rules by the
Central Bank of Ireland.
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