Our Pools
Key Features
When asked to create a “Wish List” of the key features they would like to see in a commodity pool product, growers responded as follows:
Key pooling features;
- No financing charges
- No underwriting fees
- Majority cash received at or close to harvest
- Price upside, similar to stored grain
Key hedging features;
- No margin calls or margin funding
- No production risk exposure
- No washouts – ever!
- Preference for someone with specialist knowledge of commodity derivatives to monitor and trade these markets for them.
A tall order to fill given there were no traditional pools or hedging products at the time which contained all of these key features. Therefore, in early 2008, through ongoing consultation and support from growers within the north-central Victoria and south-central NSW region, Commodity Pool Operations Ltd was established for the purpose of designing such a product.
Our first product, CPOL’s 85:15 Wheat Pool, was introduced for the 2008/09 harvest and is, we believe, the first of its kind in Australia to include all of the above key features.
Main Advantages
Improves Cashflow
Lowers Overall Price Risk
Fewer Worries as to How and When to Sell
With the rising trend in on-farm stored grain, cashflow is being increasingly shifted into the post-harvest period and is an area which is adversely affected by this mainly positive trend.
CPOL’s 85:15 Commodity Pools were designed to help restore a more balanced distribution of cashflow between the harvest and post-harvest periods, without compromising the positive characteristics normally associated with stored grain sales.
Our commodity pools achieve this by selling the physical at or close to harvest, thereby releasing the majority of this physical grain’s “stored” value, which is returned to growers in March. Using the remaining balance, being 15% of the pool’s Average Port Price, call options are initially purchased to benefit from, as does stored grain, a post-harvest rise in grain prices. As post-harvest prices fluctuate, both up and down, open positions may either be closed or offset with sold futures in order to a.) lock-in profits, or b.) benefit from lower prices as the next harvest period approaches.
By employing this type of strategy, cashflow is improved, downside price risk is known upfront, and beneficial exposure to higher post-harvest prices is retained similar to that of stored grain.
When allocated its position alongside growers' harvest cashed and post-harvest grain sales programs, overall price risks are lowered with fewer worries as to how and when to sell grain.