Managing Risk

If it’s not the movement of interest rates, it’s the value of the Aussie dollar. While we know the last thing you want to be doing is speculating on interest rates, commodity prices and currency movements, it’s hard to avoid exposure to these fluctuations.

Whatever your exposure, there’s no way to eliminate the risk… but you can certainly manage it.

Commodity Risk Management
Commodity risk management products can provide certainty around fluctuating prices, making it easier to predict and manage your profit margins. They can also provide the opportunity to benefit from favourable movements in commodity prices.

A variety of risk management solutions such as swaps and options are available on selected agricultural and other commodities. They are cash settled and do not require physical delivery of the produce to the Bank. In addition, holders are not subject to margin calls as these are ‘over the counter’ instruments.

Wheat Swaps*
Australian growers and purchasers of wheat have an exposure to fluctuating prices resulting from movements in international wheat sales conducted in US dollars. Our AUD (Australian dollar) Wheat Swaps can help you to manage the risk of these fluctuating prices, by offering you a fixed Australian dollar wheat price per tonne.

Who should look to use AUD Wheat Swaps?

• growers and purchasers who want a fixed AUD wheat price per tonne.
• growers and purchasers who want a simple method of managing wheat price risk that does not involve detailed understanding and access to the currency and futures market.
• growers and purchasers who don’t want to be subject to exchange traded brokerage and margin calls
• growers who deliver into the basis pool
• growers and purchasers who want to take a tactical view on wheat prices
• growers and purchasers with at least 136 tonnes to hedge

The benefits

• growers and purchasers can fix an AUD wheat price per tonne that covers the majority of their wheat price risk
• the ability to reduce or remove the volatility and uncertainty associated with fluctuations in USD wheat prices and currency movements
• no requirement to physically deliver wheat to the Bank
• removal of exchange-traded brokerage and margin calls

Points to consider

• upon entering an AUD Wheat Swap, the AUD wheat price per tonne becomes fixed. This results in an inability to take advantage of any favourable future price movement.
• an AUD Wheat Swap is cash settled at maturity. No physical delivery of wheat to the Bank takes place under these transactions.
• an AUD Wheat Swap is cash settled at maturity irrespective of whether or not the grower or purchaser has the physical wheat

Currency Risk Management
If you want to safeguard your bottom line from the negative impact of exchange rate fluctuations you might consider a currency risk management solution. Currency risk management is designed to deliver maximum return to your business at a minimum cost, using foreign exchange solutions. And because exchange rate volatility can provide opportunities for gains, implementing a risk management strategy gives you the best of both worlds, allowing you to strike a balance between risk and return.

Interest Rate Risk Management
Flexi Bill Solutions for Borrowers are designed to help manage this risk with a range of alternatives around flexibility, certainty and opportunity.

To view the full range of commodity price risk management products please click here:
Agribusiness Products

Important information about advice
As this advice has been prepared without considering your objectives, financial situation or needs, you should, before acting on the advice, consider its appropriateness to your circumstances.

All products mentioned on this web page are issued by the Commonwealth Bank of Australia, view our  Financial Services Guide (PDF 59kb). View Product Disclosure Statements (PDSs) for Agricultural Swaps (PDF 132kb), Agricultural Collar (PDF 146kb) and  Agricultural Options (PDF 141kb) and consider them before making any decision about these products.

Other important information
Applications for finance are subject to the Bank’s normal credit approval. Full terms and conditions are included in the loan offer. Bank fees and Government charges may apply.