Is long the Futures market of Raw Milk, a tool that will provide predictability to the business of the dairy sector of Argentina, allowing both to the producer as seller, and the industry as a buyer, to develop a hedging strategy.
Future of Raw Milk
Allow to fix in advance the price of purchase-sale of the milk
There is No physical delivery of milk, but the contracts are settled by the difference of
price between the value agreed original and the reference value for the raw milk
informed by the SIGLeA
To hire the Market requires the deposit of a security (Margin) for the contract,
that is returned when the operation is canceled.
The loss/gain in function of the evolution of the price with respect to the price
hired are paid for in advance, in cash.
What is traded?
Financial Resources
To be able to hire in the Market requires the deposit of a security (Margin) for the contract, which is returned to cancel the operation.
Contract
Remember that the margins can be covered with financial assets such as government securities, fixed deadlines, cuotapartes of FCI, in order to mitigate the financial cost.
How coverage works?
The coverage is a tool used to minimize the economic risk generated by the volatility of prices.
Example:
In the month of December 2018 a producer that markets its milk with a payment method where you pay off the value of SIGLeA+$0.30 per litre you want to set the price to 150,000 litres of milk that is going to deliver during the month of February 2019. Currently the future March (the price of the march to reflect the price for milk sold in February) of raw milk is negotiated to a value of $10 per liter.
To ensure the price you decide to sell 30 contracts (30 x 5,000= 150,000 litres of milk) of milk-raw, march, 2019, at $10.
Results of the coverage:
Through the sale of futures at $10, the producer is assured to be compensated for any variation of price with respect to such level. In this way, delivering the milk to their usual customer, that you're going to pay SIGLeA+$0.30 per liter, ensures a price of $10.30 to milk delivered during the month of February 2019.
At the time of cancel the contract in March 2019, there are three possible scenarios:
1. The price of the SIGLeA is less than $10: you receive compensation for the drop in the price.
2. The price of the SIGLeA is equal to $10: neutral outcome
3. The price of the SIGLeA is greater than $10: you deposit a loss for the difference between the
final price and the $10 agreed initially
How to access the trading?
It is necessary to specify the following steps:
*Keep in mind that the commission of the agent agreed privately between client and agent. The commission of 0.25% is only an example.
1. Contact an Agent authorized by the National Securities Commission
(www.cnv.gov.ar ) to act as an intermediary in the Capital Market.
2. Arrange the opening of an Account Customer, which authorizes the Agent
to operate the order and on account of the purchaser in the Market
3. Provide supporting documentation that proves existence as a physical person or
legal status (identity card, proof of CUIT or CUIL) and payroll of persons entitled to exercise
the will of the company.
4. Demonstration of income of the owners of the account (pay stubs, statement
affidavit of IIGG, balance sheets, as appropriate).
5. Fund the account through a bank transfer to the account of the Agent
* Through the web of ROFEX/MATBA I can view the list of agents authorized to operate:
https://www.rofex.com.ar/agentes/agentes_rofex/
http://www.matba.com.ar/pdf/Agentes/listado.Actualizado.pdf
FUTURES MARKETS FOR RAW MILK