Commodity hedging inside the processor's raw material cost
The purchase contract fixed the price. The margin stayed open.
Commodity hedging for buying processors: corn or soybean futures, regional basis and FX consolidated into an effective acquisition cost that is managed, not merely budgeted. The raw material purchase is negotiated with the supplier and the price is agreed. The contract is signed, delivery is scheduled, and the cost enters the budget as a settled number. That agreed price, however, references an exchange future and a foreign currency, and both keep moving until settlement, along with the delivery location basis. By the time the product is consumed, the effective acquisition cost is rarely the budgeted one, and the difference shows up in gross margin with no name of its own.
Get in TouchHow the exposure works
- The coming months' purchase requirement is an open short position, even though no internal report shows it as such.
- The three legs live in separate environments: the physical in the ERP, the derivative at the bank and the FX in treasury. There is no consolidated exposure figure.
- Deciding when to hedge depends on continuous market reading, which requires a dedicated desk and daily monitoring.
How delegated management works
| Module | What it delivers |
|---|---|
| Risk governance agreement | Parameters, limits and objectives set in writing and aligned with the industrial margin target and the company's liquidity constraints, before any trade. |
| Exposure mapping | The purchase requirement is recorded as a position, net of contracted inventory, with dollar exposure calculated and a recommended hedge ratio. |
| Active management | Trading the delegated volume with a focus on reducing effective acquisition cost, covering the futures, basis and FX legs, and managing margin calls. |
| Monitoring and accountability | Daily position and P&L reports, mark-to-market by strategy and counterparty, and designation documentation for the accounting close. |
What the company gains
- Effective acquisition cost managed, not merely budgeted.
- Consolidated physical, derivative and FX exposure.
- Gross margin predictability across the cycle.
- No need to build a desk or hire a quant team.
What stays with the company
- Supplier negotiation, the purchasing decision and industrial operations remain entirely yours.
- Management runs within board-approved limits and is reported daily, with an auditable trail.
- The mandate can start with one commodity or a share of the volume, and expand as results come in.
Hedge management track record
2.6 c$/lb
Hedge alpha
Average reduction in hedge price versus a passive futures lock.
3.5
Information Ratio
Consistency of alpha generation adjusted for tracking error.
90%
Hit rate
Accuracy of hedging decisions over an auditable historical series.
An alternative for those who prefer to manage in-house
For companies with a structured treasury, we license the UHEDGE CTRM: exposure map with recommended hedge ratio, instrument calculator, physical curves with location basis, daily marking and VaR by factor. Both fronts can be combined.
Who leads it
Rafael Lins dos Anjos, founding partner. Mechatronics Engineer from Poli-USP, with master's degrees in Economics from Insper and in Finance from London Business School. Around twenty years in global banks and commodity merchants, including Santander, Macquarie in London, Banco Pine and ED&F Man, where he headed the global OTC desk. CGA and CGE certified by ANBIMA.
See the full track recordSuggested next step
A no-cost diagnostic on a purchasing cycle already closed. With the period's contracts, we can compare budgeted cost with effective acquisition cost and show how much of the difference came from price, basis and FX. A forty-five-minute meeting is enough to decide whether it makes sense to continue.
Get in TouchFrequently asked questions
What is effective acquisition cost?
The final delivered cost of raw material at the plant: futures, regional basis, freight and the FX leg of imported inputs — not just the screen price.
How does a processor hedge corn or soybean cost?
By combining futures, options and basis locks over the same horizon as the sales commitment for the finished product.
Does hedging replace physical buying?
No. It separates the price decision from the logistics decision: physical purchasing continues with the usual suppliers.
Related profiles
Farmers, Mills, Grain Handlers and Exporters
Pricing decisions with method: crop exposure mapped, regional basis assessed against its own history and the FX leg managed.
Barter: Input Distributors, Dealers and Manufacturers
A three-leg hedge — grain, basis and FX — under delegated management, protecting margin between pricing and delivery.
Sources and notes
Track record: results of UHEDGE managed hedge portfolios, measured against a passive sugar futures (ICE) benchmark over an auditable historical series. The commodities fund began operations in November 2024. Calculation memo and methodology available on request.
Past performance is no guarantee of future results. Informational material only; not a public offering, an investment recommendation or a guarantee of results. Derivatives transactions involve risk of loss. The terms of each service are defined by contract.