Kernel trades 50 pct of crop on forward contracts
The Kernel company trades c. 50 pct of the produced crop on forward contracts. This was informed by Oleksandr Golovin, Grain and Oilseeds Purchase Director at Kernel.
The world practice indicates that forward sale of 50-70 pct of the crop allows companies to work steadily, hedge price risks and ensure logistics for commodities shipment during the season.
“Every year, Kernel exports an average of about 4 million tons of grains, but by the end of March this year the indicator reached 5.7 million tons. Considering the company's strategy to increase export volume to 8 million tons, the development of the forward program is our priority,” notes Oleksandr Golovin.
The forward price is formed based on FOB or CIF prices for the future delivery period. The price includes logistics cost, transshipment and trading margins.
Procurement directly from agricultural producers without intermediaries is the company's priority. Kernel has a financing program for farmers-partners which includes an option of forward contracts. Under this program, the company purchases sunflower, corn, wheat, barley. According to Oleksandr Golovin, the price for these commodities can be fixed or flexible, and the producer can determine the period of fixing the cost independently. To participate in the forward program, the supplier must fulfil his obligations, and in case of pre-financing, be ready to issue an agrarian receipt.
“We cooperate with more than 5 000 agriproducers across all regions developing a strategic partnership within the framework of the Open Agribusiness project. All conditions of the forward program are exclusively transparent and are publicly available on the Open Agribusiness multifunctional portal. Actual purchase prices for grains and oilseeds are available and updated in real time on one and the same resource. The option of SMS notification about price changes is also available. The electronic document management process has been established for partners. It is fundamentally important for us to create favourable and comfortable conditions for producers, providing them with competitive advantages in the market,” added Oleksandr Golovin.
Previously it was reported that the Antimonopoly Committee of Ukraine (AMCU) had authorized the Koviahy Grain company, a subsidiary of Agromino, for the purchase of Kernel's Huty Elevator in Kharkiv region.