Take the risk out of energy and material price fluctuations.
The use of commodities in a company’s manufacturing process opens up avenues of risk due to the volatility commodity prices in the global marketplace. Hedging programs will allow the client to better manage future costs and minimize business risk. There are multiple benefits to utilizing a hedging strategy, and two of the most important are the ability to lock in favorable costs for the future and reducing volatility. By entering into a swap agreement will let an investor lock in a fixed price over set periods despite changing market prices.
Examples of clients who use commodity hedging include:
- Airlines locking in current jet fuel prices for future deliveries.
- Food manufacturers mitigating the risk of rising crop prices.
- An air conditioning manufacturer establishing a set price for future copper deliveries.
We have assisted clients implement hedging programs for direct purchases or sales of a commodity, as in hedging fuel or precious metals purchases; as well as hedging the cost of raw materials whose price is a function of another commodity, such as plastics. We have depth of experience in:
- Fuel and Energy Hedging
- Precious Metals
- Petroleum-based raw material costs
- Swaps, Options
Our relationship with the client is not limited to arranging an appropriate hedging strategy and its execution. We will further assist the client in a range of accounting and valuation services associated with the hedge. We want to ensure each unique client implements the right derivative, at the right price, on the best terms.
In addition, DAG assists the client ease the burden of complex reporting standards by supplying all necessary documentation and data from initial hedge designation, hedge inception documentation, and effectiveness testing, to ongoing journal entries, shock analyses, sensitivity analyses, and more.
DAG is not just an agent to execute your hedge; we strive to establish an on-going partnership to exclusively represent your interests.