Miller Magazine Issue: 122 February 2020

16 NEWS MILLER / FEBRUARY 2020 Matt Ammermann* Commodity Risk Manager Vice President Eastern Europe/Black Sea Region INTL FCStone Financial Inc.- FCM Division** Risk- you drive it or let it drive you Guest Author Hedging and risk management help improve and control margins and the impact of commodity prices to a business’s operations. The region of the world that I focus on in Eastern Europe/Black Sea Region there remains a lot of unique commodity risks to watch. How to hedge that, with BWF? Matif wheat? Chicago or KC? BCF or Chicago corn? Futures or options given correlations present? Then you also have to consider FX implications if this remains a risk as well. Every com- pany has a unique set of circumstances as well as knowledge level, and therefore the approach to hedging varies, but the point is that companies exposed to price risk should be progressing with the subject in some regards. So instead of wanting to be right, let's focus on being wrong less! Stay hedged up! We all like to be right, right?! Yes, this is human nature, but we also have our flaws and can be incorrect, this is whe- re the topic of hedging comes in. In simple terms, hedging helps protect us from the unknown or subjects that remain out of our control. Hedging involves taking an equal, or near equal opposite position to help offset some of your price risk. Sure, with hedging you give up some gains if the market moves in your favor, but you have an element of protection in place. In the event of the market going against your cash position you also help protect your losses. This type of risk management is a constant analysis of spreads and basis and the price relationship with one product vs the other, much like what FX pairs represent. Hedging can be a complex subject, but in reality, we all are actively hedging every day. You drive a car? You buy car insurance. It looks like it will rain today? You grab an umbrella. You don’t plan on getting sick or going to the doctor, but yet you have health insurance. You don’t plan for a fire on your assets, but yet