Risk Management Education Improves Global Grains Purchasing Processes

With the ongoing global pandemic affecting global grain prices, the U.S. Grains Council’s (USGC’s) risk management education is a powerful tool to assist feed grain buyers in protecting their pricing decisions in the futures markets.

As a neutral partner, the Council often works with industry representatives to offer this education around the world while connecting end-users to services that improve their purchasing processes and strengthen relationships.

In March 2020, Reece Cannady, USGC manager of global trade, and Guy Allen of Kansas State University’s International Grain Program (IGP) traveled to Mexico to understand how end-users procure grain and use financial tools such as options and futures. The mission served as an opportunity to provide individualized consultations and collect insights for educational needs. The program was timely, happening just before the start of travel restrictions due to the pandemic and Mexico’s currency crisis. The group reconvened virtually in April 2020 for a webinar to dive deeper into risk management education and offer guidance in the early stages of the pandemic.

As a result of the recommendations provided by the Council, companies were able to adjust their least-cost procurement buying models with basic option strategies to lock in better prices for 2020 and manage their foreign exchange risk. This positioned them to be able to import more grain from the United States and keep their businesses profitable despite the economic downturn.

While the Council’s efforts to offer risk management programs began well before that mission, events since then have provided overseas customers the assurance that the Council remains attuned to current market challenges.

Similar programming was also held virtually in the Council’s Latin America region, targeted at end-users of corn in Central and South America. The program was hosted by Council member Commodity & Ingredient Hedging, LLC, and focused on illuminating the basic concepts on which the futures markets operate and financial instruments used to manage price risk.

Throughout early 2021, USGC’s office in Latin America held an eight-session virtual course on feed grains procurement for pork producers in the region. To provide attendees with a holistic education, one session focused on risk management, in which representatives from Council member company StoneX explained the basic concepts related to price risk and how to manage it. This session helped attendees and future importers learn about available tools to assist with buying processes.

“The Latin American office has included sessions on risk management in other training initiatives, either as part of a thorough program or individually,” said Ana Maria Ballesteros, USGC marketing director for Latin America. “It is something that customers usually ask for because they want to learn about it.”

On the other side of the world, earlier this year USGC offered virtual risk management programming for 50 key feed grain importers and feed millers from Africa, the Middle East and South Asia, including participants from Morocco, Algeria, Tunisia, Egypt, Saudi Arabia, the United Arab Emirates, Oman, Jordan, Turkey, India and Bangladesh. Council member company Delong Company led a discussion on containerized shipments of distiller’s dried grains with solubles (DDGS) and other corn co-products to those locations.

Constant, around-the-world risk management education continues to be an important theme for overseas buyers due to exchange rate volatility and pandemic price shocks, and the Council plans to continue to offer these programs in the future, including those focused on company-specific approaches.

Read more about the Council’s work with risk management education.