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Commodity Price Risk

We are exposed to adverse changes in the value of our residual positions arising from market price movements. The price risk for products which have a liquid futures market is controlled through hedging, mainly using exchange traded futures and options. The main exchanges used for hedging are the London International Financial Futures Exchange (LIFFE), the Intercontinental Exchange (ICE) and the Chicago Board of Trade (CBOT).

Olam typically hedges all physical trades with a corresponding futures contract. The basis or spread risk arising from this hedging activity, which is a small sub-set of the outright price risk, is controlled through exposure limits. These are closely monitored by the RO on a daily basis to ensure they are within approved limits.