Hedging by FMCG Companies

Hedging is a most familiar term in the field of Futures Trading.Hedging is a Price Risk Management Tool in the Derivatives market.Re-introduction of Commodities Futures Trading in India for the Price Discovery for the Farmers & Price Risk management through Hedging.This Hedging popularly used by large number of Corporate s to keep away from adverse price fluctuations.This Article is about How FMCG Companies Hedged through Commodity Exchanges Keep the costs down.

FMCG companies hedge at commexes to keep the costs down.For the rising prices of commodities and volatility in the prices of food products, fast moving consumer goods (FMCG) companies are using the commodities exchanges for hedging to source raw materials. As a part of their strategy to keep margins and profits on the higher side even though downturn in the economy.

 FMCG companies mostly using the platform of two national commodities exchanges - Multi Commodity Exchange (MCX) and National Commodity and Derivatives Exchange (NCDEX) for hedging their supplies of raw materials.

FMCG companies of varied product portfolio are into hedging.Confectionery, Soft drinks, Starch products, Vegetable oils sectors mostly hedge in Exchanges. Dabur and ITC are hedging aggressively in the commodities exchanges for their raw materials supply.Other FMCG companies like Coke, Pepsi, MDH, and Ruchi group also do hedging.

Expertise Team For Hedging

Hedging companies having an Internal Team Of Buyers.They accurately predicted the commodity price movement and taken optimal positions in the physical and futures markets.The companies plan in advance and hedge the price well before the harvest of the product to buffer against adverse price movements.

Hedging Commodities

ITC hedging for soyabeans in a major way, it also hedges coffee along with spices like black pepper and chillies. Dabur hedges commodities like jeera, pepper, edible oils and sugar.

Wheat was a popular commodity traded in the commodity exchanges,companies which are into bakery product are mostly involved with securing the wheat contract.Wheat futures were very handy as a risk management tool, because farmers sell their wheat in two months after harvest.

The agri-business division of ITC sources several agro-commodities through its eChoupals. Their preference is to hedge as far forward as the futures contracts provide the liquidity, because our objective is price risk management for year long usage of raw material.

Volumes of Hedged Commodities

 The quantity involved is also not uniform throughout the spectrum of industries.Their Volumes are also unable to track because mostly it is done through members. FMCG companies usually Hedge for a part of the output and not the entire output.

Commodity Exchanges lead a way to the Hedging Platform For FMCG Companies and also create a new Job avenue for whoever having expertise in the field apart from broking.