Hedging & Risk Management

The Leese Trading Group is not just a futures broker but a partner to its clients.

We believe that hedging and risk management is a large part of the customer’s success equation, which is why we take the time to assess the client’s needs in providing the optimal ag risk management and monitoring solutions to help control trade risk.

WHAT IS HEDGING?

Hedging is based on the principle that cash market prices and futures market prices tend to move up and down together. This movement is not necessarily identical, but it usually is close enough that it is possible to lessen the risk of a loss in the cash market by taking an opposite position in the futures market.

WHO HEDGES?

A hedging strategy is a prudent risk management strategy for a variety of agricultural participants from growers to processors. Here are just a few examples:

  • Farmers, livestock producers – who need protection against declining prices for crops or livestock, or against rising prices of purchased inputs such as feed
  • Merchandisers, elevators – who need protection against lower prices between the time they purchase or contract to purchase grain from farmers and the time it is sold
  • Food processors, feed manufacturers – who need protection against increasing raw material costs or against decreasing inventory values
  • Exporters – who need protection against higher prices for grain contracted for future delivery but not yet purchased
  • Importers – who want to take advantage of lower prices for grain contracted for future delivery but not yet received

DEVELOPING AN AG HEDGING STRATEGY: RISK MANAGEMENT

Hedging is more than just price prediction. It takes into account various factors such as risk tolerance, your production/consumption, and trends. The brokerage team at Leese Trading Group uses the insight compiled through various resources, industry contacts, and trend analysis to create its own research—made available to all clients as LTG Ag Insight—to create a hedging strategy for your business.