Agricultural derivatives on mid-sized banks' OTC desks
The credit risk of the crop sits with the bank. The hedging revenue from the same client does not.
Agricultural derivatives for the OTC desk: commodity hedging priced in-house or routed to the asset manager, capturing hedging revenue from the rural credit book the bank already owns. The bank approves crop financing, formalises the collateral and follows the farmer through the cycle. The relationship holds and, next season, the line is renewed. At some point during that period the farmer buys price protection, almost always from another institution. The reason is rarely commercial: the treasury trades FX and rates competently and has no engine to price agricultural commodity volatility with the confidence a quote requires.
Get in TouchWhat usually happens
- The desk does not quote agricultural commodity derivatives, or trades back-to-back and retains a thin slice of the spread.
- Without its own engine, the institution accepts the partner's price rather than negotiating it, having no reference for the theoretical mid.
- Reliance on spreadsheets for pricing and limit control tends to become an audit finding.
Two ways to address it
| Module | What it delivers |
|---|---|
| CTRM licensing | Pricing engine, recorded quotes, term sheets, counterparty limit checks, daily marking and audit trail. A complementary layer to the treasury system, not a replacement. |
| Referral to the asset manager | Clients whose scale does not justify desk coverage can be referred to UHEDGE Asset Management, authorised by the CVM, under a referral agreement with revenue sharing. |
| Governance | Segregated profiles across desk, middle office, risk and audit, with an immutable trail and defined retention. |
| Vendor assessment | Architecture, information security, continuity and an exit plan with full data export, available at first contact. |
What the institution starts to measure
- Desk revenue per corporate client and per capital allocated.
- Penetration of hedging products within the existing credit book.
- Limit compliance without manual exceptions.
- Time between the relationship manager's request and the delivered quote.
What stays with the institution
- The relationship, the credit and the commercial decision remain entirely the bank's.
- Under the referral model, management is delegated with pre-agreed risk governance and daily reporting to the client and the bank.
- There is no additional regulatory exposure for the institution on the asset management front.
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.
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 thirty-minute sizing session. With your corporate book, we can estimate the volume of protection currently bought outside the institution and the corresponding revenue. The technical demo can follow, already calibrated to the client profile the bank serves. The vendor assessment dossier is sent at first contact.
Get in TouchFrequently asked questions
What are agricultural derivatives?
Futures, options and OTC structures on soybeans, corn, coffee, cattle, sugar and the related FX leg, used to lock prices and protect margins.
Why should a mid-sized bank run an agricultural derivatives desk?
Because its rural credit book already demands price protection, and today that revenue is usually captured by another bank or a trading house.
Can we start without building a full desk?
Yes. The bank can route the trade to the asset manager under a reciprocity agreement before bringing pricing in-house.
Related profiles
Agri Credit Backed by Physical Collateral
LTV marked to market with regional basis throughout the season, separating price-driven defaults from credit-driven ones.
Commodity Brokers, FCMs and OTC Providers
Your own pricing engine instead of back-to-back pass-through, with retained margin, measured conversion and an execution mandate.
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.