Would his macho approach be enough when, over the past 20 years, volatility in dairy prices has:
That’s what’s driving the exchanges to develop products, with three of the top four exchanges around the world now offering dairy futures contracts (CME, Eurex and NYSE Euronext).
This week, the launch of the NZX dairy futures market, with some early trading being accomplished. There is also an increase in the number of ‘Over the Counter’ or bi-lateral deals being made by brokers such as FCStone.
The attendance at the seminar was excellent, with a wide range of companies from across Europe attending. The aim of the day was to provide a practical guide to companies wanting to start developing a risk management system, and some were clearly moving in that direction.
What I thought was excellent – as well as the ‘How to’ guides from the traders – were the three presentations from companies who are already doing the risk management ‘thing’ (Fonterra, Glanbia and Schreiber), who gave an excellent and honest view of the drivers, prospects and pitfalls of starting to hedge.
Its still early days for these systems, and everyone should at least consider using the markets. Only in this way will there be enough liquidity to make the market usable and to get the effect we need in dampening excessive volatility.
So, who should get into the market first? Everyone should. It was clear from those clustered around the brokers at the end of the seminar that more will enter the market over the coming months, but progress should be viewed over the medium-term of two to three years, as continued market deregulation occurs and these new markets come into their own.
Kevin Bellamy directs Zenith International’s wide-ranging activities in the dairy industry. You can contact him here.
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