Leading Advisor on pricing issues to consumers of raw commodities, banks, trade houses, legal firms, accountants, industry bodies and educational organisations.

Container transport ship

Farmarco is a proven provider of discrete, independent and individually tailored acquisition and price risk management advice to consumers of commodities in Australia. Our ongoing client base includes some of Australia’s larger corporate commodity consumers and producers of grains, oilseed, meals, oils, sugar and cotton.

For over twenty-five years, Farmarco has developed an extensive resume of once-off consultancies provided to organisations such as banks, trade houses, legal firms, accountants, industry bodies and educational organisations.

Effectively managing raw material price risk for consumers
Farmarco brings additional expertise and market insight to the table to assist consumers to effectively manage raw materials price risk. This external support can either complement existing management resources or provide the management of commodity acquisition and pricing in its totality. Consultancies are provided both in physical markets and derivative markets. Farmarco’s depth of market knowledge and available support data allows for flexible, credible and timely presentation of advice/recommendations.

Cash Commodity Markets and Physical Premiums (Basis)
Farmarco has unparalleled experience and a wealth of quality data on cash prices and physical premiums (basis) for various commodities. We provide independent support to procurement managers in sourcing commodity suppliers, and negotiating competitive contract values and terms (specifically physical premiums or cash prices - using our extensive market knowledge and strong databases of physical premiums and cash values). Farmarco supports clients on issues that may arise as contracts are executed.

Exchange rate markets

Derivative Markets
Many raw material consumers have pursued transparent pricing arrangements for their raw materials against the major agricultural futures markets around the world. This approach makes supply chain costs very apparent but also brings the final pricing down to how well the price risk is managed in the relevant futures market.

Finding adequate, suitable, independent market analysis, knowledge and strategic advice to manage the risk of highly volatile futures markets requires specific expertise.

Farmarco’s expertise includes market intelligence, independent analysis and interpretation, market insight, strategy and tactical experience in order to develop a strategic approach to managing the derivative market side of raw materials price risk.

Opportunity for better price risk management, as the traditional approach falters
Farmarco believes a specific focus on commodity price risk is more important than ever. A traditional approach for consumers has been to concentrate on operational activities. Price risk was managed by relying on low volatility in the commodity markets, the ability to absorb short term price spikes, or the ability to pass on raw material costs. Multi-commodity consumers tended to rely on their number of non correlated commodities to manage their price risk.

Since the mid 2000s, this traditional approach has struggled with the heightened complexity and volatility in commodity markets. In addition, previously non-correlated commodities are all seeing sustained price rises simultaneously. The concentration of buyer’s power along supply chain has meant greater resistance to passing on cost increases, especially those related to raw material price rises.

Farmarco spends considerable time and energy assisting clients to deal with these market changes. By developing holistic strategies to managing price risk, Farmarco supports a forward looking raw material acquisition plan, concentrating on margin sustainability and procurement strategies that have more flexibility so that they can evolve with the commodity cycle.

Strong Foundations
Farmarco’s philosophy is to ensure clients have strong commodity price risk management foundations. Many consultancies are executed with a substantial educational focus for both Board and Senior Management, including monthly Board meeting presentations and data for Board Papers.

For our corporate clients we perform various functions including:

  • Developing and implementing Commodity Price Risk Management Policies and
  • Developing Procedural documents
  • Financial recognition of derivatives
  • Independent board reporting.

Once-off consultancies
Farmarco continues to provide once-off consultancy projects. Frequent requests include:

  • Expert opinions
  • Valuation of physical commodities
  • Independent reviews of commodity price risk management systems
  • Audits of price risk management policies and procedures
  • Education programs focusing on managing price risk
  • Specific market analysis projects on physical and derivative markets
  • Industry studies

Contact Us to see how Farmarco can provide Corporate & Commercial Consulting.

Farmarco    104 Herries Street, Toowoomba, Queensland    Phone: +61 7 4637 6400    Fax: +61 7 4637 6464    Email: farmarco@farmarco.com.au