Markets

Agriculture & Soft Commodities

 

Your Challenges

Accurately modelling forward prices of immature and infrequently traded markets

Timely and accurately pricing complex contracts such as crush spreads, accumulators and fixation options

Accurately modelling and quantifying the effect of extreme weather effects (flooding, drought or frosts) on your agricultural portfolio

Accurately modelling and quantifying the effects of physical constraints and logistical effects (such as rail, barge or air shipping delays, processing plant downtime or crops spoiling due to warehousing delays)

Understanding, valuing & maximising the full optionality that can exist within a locational diverse agricultural and soft commodity portfolio

Analysing different hedging strategies to determine the best way to manage your agricultural exposure

We Understand Your Market

Agricultural products like grains, oilseeds, biofuels, and fertilizers go through cycles of supressed and hyper volatility in both price and supply. Combined with limited price liquidity, quality and location spreads, complex contract terms and perishability, it can be a real challenge to capture and assess portfolio risks. Market players with agricultural commodity exposures either as a producer, processor or consumer (eg food & beverage operators) need to adhere to sound risk management principles to stabilise their cashflows and optimise profitability.

These  players require tools that can capture both the financial and physical movements of agricultural trading, processing and purchasing. Lacima understands the specific requirements of companies exposed to numerous agricultural commodity risks and works with them to ensure they can optimise their portfolio while maximising profits.

Our Solution

Lacima offers two solutions for Agriculture & Soft Commodity market participants: Lacima Trader and Lacima Analytics – providing a complete solution from managing trading and hedging requirements as well as commodity risk management.

Lacima’s solutions use the same consistent models and methodologies to capture the unique market characteristics whilst providing the comfort of stress testing and scenario analysis tools to analyse future uncertainty.

Whether you are in Trading, Structuring & Origination or in Risk Management, use Lacima’s solutions to accurately value both financial contracts and physical assets as well as support key decision making by leveraging Lacima’s risk solutions to gain deep insights into the drivers of risk and how they change through time. Lacima calculates the full range of market and credit risk metrics including Earnings-at-Risk (EaR) and Revenue-at-Risk (RaR), as well as more standard risk management metrics such as Value-at-Risk (VaR) and Potential Future Exposure (PFE), for superior trading and risk management results.

Ags & Softs Traders, Structurers, and Risk Managers can enjoy a range of benefits including:

  • Assess the relevant risk metrics (like parametric, historical or Monte Carlo VaR) for agricultural players
  • Analyse different hedging strategies to best manage your agricultural exposure
  • Understand the most relevant models to capture the unique characteristics of agricultural commodity prices
  • Assess valuation frameworks that accurately value long-term agricultural contracts for off take, crushing, warehousing and transportation so that you don’t leave profit on the table
  • Capture all the parameters of complex derivative contracts such as fixation options, crush spreads, accumulators and locational spreads
  • Value and optimise the crushing and processing operation
  • Value and optimise the warehousing and silo storage of agricultural commodities
  • Value and optimise the flexibility of transporting agricultural commodities via truck, rail, vessel or barges
  • Analyse large books of agricultural commodities derivative deals
  • Undertake scenario analysis such as “what-if” deals, stress testing on prices or volumes and other model parameters
  • Understand your VaR drivers and the effect that trades within your portfolio have on your overall VaR and changes with VaR attribution
  • Report company-wide risks across your assets and drill down to individual regions, products, trading desks, traders and deals to fully understand your risks and sources of value