Commonwealth Bank launches new Grain Swap products
19 June 2007
The Commonwealth Bank has today announced the launch of Australia’s first suite of ASX Grain Swap hedging products for producers and consumers seeking sophisticated and innovative ways to hedge grain exposures.
"Global grain prices are now at the highest level in over a decade so some excellent hedging opportunities exist for producers at present," said Tobin Gorey, the bank’s Head of Commodities Research.
Essentially, ASX Grain Swaps will provide a level of price protection in case the market moves in an unfavourable direction. It means producers and consumers with grain exposures can have some certainty around pricing and risk management.
ASX Grain Swaps provide commodity price protection by setting a price where the customer is guaranteed to receive an agreed fixed price for an agreed quantity of a commodity on an agreed future date even of the commodity price falls. On that date, a cash settlement is payable without actual physical delivery of the commodity to the bank.
"Grain producers and consumers both have an exposure to price movements and are always seeking hedging solutions to suit their individual needs," said Jon Sutton, Executive General Manager, Agribusiness. "By using these grain swap products, one thing they can be certain about is price and that’s incredibly important; producers can lock in the selling price while consumers can lock in the purchase price."
The bank will offer swaps referenced to the local ASX Milling Wheat; ASX Feed Barley; ASX Sorghum; and ASX Canola.
This is the third new agricultural swap product the bank has introduced for its agribusiness customers in the last four months – following Agricultural Swap with Collateral Margining and Agricultural Participating Swaps – and the bank believes these innovative products are significant developments for the industry.
"The agriculture industry operates in very volatile conditions as we have seen with the recent drought. As a result, we have seen a steady increase in customer appetite for hedging products so we’re really pleased to be able to offer a suite of products to assist them in better managing their businesses." said Mr Sutton.
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