Managing Price Risk - Part Two
Yesterday we reported on a tool to manage price risk for agricultural commodities that don’t have an active futures exchange. In fact 92% of the world’s commodities do not have a futures contract in order to hedge their risk. Stable is a company offering index-based risk management products for these commodities that function like insurance policies. USA commercial director Jim Sullivan says this includes specialty crops like avocados, for example.
Sullivan… “In 2000, the US imported 50,000 tons of avocados. You fast forward to 2020, just two decades later, and we imported over a million tons of avocados.”
Sullivan says that despite this tremendous growth in imports plus domestic production, avocado buyers and sellers don’t have efficient ways to manage price risk.
Sullivan… “Stable has several indexes that reference avocados. Like for example, most of the avocados that we bring into the U S are from Mexico. I think 90% of all the avocados that we import are from Mexico. So naturally most of the price risk is associated to Mexican avocados, Mexican weather, and all that. And so we have indexes here that references avocados out of Mexico and the prices imported from there. And we've helped already this year, several different companies protect their price risk to avocados.”
Stable offers this index-based risk management products on a wide variety of agricultural goods.