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International buyers share risk management perspectivesInternational grains buyers shared their perspectives on risk management issues in relation to tightening supplies at the U.S. Grains Council's 48th Annual Board of Delegates' Meeting in Anchorage, Alaska. Catalina Correa of Solla Company in Colombia, Soon-Bin Neoh of Soon Soon Group in Malaysia and Willis Cheng of Charoen Pokphand Enterprises Co., Ltd., in Taiwan participated in a panel discussion focused on international trade from a buyer's perspective. "We do hedging but hedging is very expensive," Correa said in regards to how Solla Company has adjusted to the increased market prices. "Because I want to be one or more dollars less than my competitors, I have to hedge." In contrast Neoh said there is no concept of risk management in Southeast Asia and feedmillers instead buy grains at a flat price and arrange a CNF premium with a seller. "There is no use of the CBOT futures options in Southeast Asia because the margin call is too high for futures and the premium is too high for options," he said. The participants also shared their strategies for dealing with costs. Cheng said his company reduces costs by reducing transportation. "I ship with containers more than I ship in bulk," he said, estimating his company ships nearly 80 percent by container, when containers are available. Neoh agreed. "When you ship by containers, you have fewer stocks and a lower price," he said. While all three buyers said they will survive despite the tight supply situation, Correa added that the ratification of the pending U.S., Colombia Free Trade Agreement would drastically benefit her country. "We do not use local crops and currently, there is a 5 percent tariff on corn which comes to a $900,000 a month increase on costs," she said. A ratified FTA would bring Colombia's costs down to zero percent. "If prices continue to increase, demand will diminish but we will still be alive," Correa said. "It will hurt us hard, but we will still survive." 8/11/08 Date: 8/4/08 Advertisement
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