Price Risk Management for Physical Commodity Contracts
Agricultural commodity and fertiliser prices can move significantly between the date a contract is signed and the date the cargo is delivered. FUSHKOV GCG can offer pricing structures for its physical contracts that help buyers and producers manage this exposure, subject to contract terms and credit approval.
What price risk is
A buyer who has committed to sell finished products at a fixed price is exposed to rising raw material costs; a producer with an unsold crop is exposed to falling prices. Price risk management means deciding when and how the price of a physical contract is fixed, so that each party knows its margin or cost with greater certainty.
Hedging concepts
Typical structures (reference)
| Structure | How the price is set | Typical purpose |
|---|---|---|
| Flat (fixed) price | Price fixed at signing | Certainty of cost or revenue |
| Basis contract | Basis fixed now, futures price fixed later | Separates futures and local price risk |
| Price-to-be-fixed | Price fixed by one party within an agreed window | Flexibility in timing |
| Average pricing | Price based on an average of a reference over a period | Smooths short-term volatility |
Reference overview of commonly used structures. The scope of the service, the responsibilities of each party and all commercial terms are agreed case by case and fixed in the contract.
How we work
Pricing structures are offered as part of physical supply or purchase contracts. The reference market, pricing period, quality differentials and the mechanism for fixing the price are agreed in advance and fixed in the contract. Structures with deferred pricing or margin implications are subject to credit approval. We do not provide investment advice; each party remains responsible for its own risk decisions.
Why FUSHKOV GCG
Frequently asked questions
What does “basis” mean?
Basis is the difference between the cash price of a commodity at a given location and the price of the reference futures contract. A basis contract fixes this difference first and the futures component later.
Can I fix the price after signing the contract?
Yes, under a price-to-be-fixed or basis structure the price can be fixed within an agreed window, according to the rules set out in the contract.
Do you trade futures on behalf of clients?
No. We offer pricing structures within physical contracts; we do not act as a broker or provide investment advice.
See also
Discuss your project
Tell us the commodity, volumes, delivery period and the pricing approach you are considering — we will discuss suitable structures.
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