Managing commodity price risk through physical contracts

StoneX’s award-winning risk management consultants combine deep market intelligence and global commodity market access to provide clients with effective hedging strategies that mitigate risk and protect from financial loss.

Three reasons to have physical commodities as part of your risk management hedge strategy

Hedging establishes an equal and opposite position relative to the cash market so that volatility’s impact on margins can be minimized.
A properly designed hedging strategy not only protects your company from the financial consequences of commodity volatility, but also provides management with vital decision-making information.
A hedging strategy is the overarching solution to procuring the materials you need to protect your company’s supply chain against fluctuating commodity prices.

The StoneX approach to risk management via physical contract

A strong hedging strategy to counteract commodity price volatility will help maintain consistent revenue forecasts, anticipate accurate operating costs and profit margins, execute cost-efficient expansion plans, and deliver premium-quality customer service. Explore why customers choose StoneX for their hedging needs.

Close relationships

StoneX consultants value long-term, close relationships with their clients which enables them to know the ins and outs of their businesses.

In order to effectively protect clients from everchanging commodity prices, our price-risk management specialists take the time to understand your specific needs, goals and systems so that they can create a unique hedging plan that reduces risk exposure and protects margins.

Extensive resources

An invaluable resource at StoneX is our professional price-risk management teams, who have deep knowledge of the cash markets they cover, financing, structuring deals, hedging and risk management.

When we combine our people resources with institutional-grade trading platforms, access to global commodity futures exchanges and deep market expertise, we are a powerful resource for those who demand excellence.

Design and execution

Our award-winning price-risk management teams do not get enticed by speculative gains. They design systematic hedging programs that are built on proven commodity risk management principles and tailored to your specific business needs.

When you partner with StoneX, our work does not stop there. We help you execute the plan while continuing to monitor price movements and reevaluate hedging strategies to take advantage of basis opportunities.

Physical commodity markets offered by StoneX

Our commodity financing and trade facilitation business provides working capital to goods and services companies for the finance of commodity inventory and hedge margin. We cover a broad array of commodities, including most agricultural and soft commodities, metals and energy products.

Carbon

Cocoa

Coffee

Cotton

Grains/oilseeds

Metals

Energy

Explore our commodities markets

Want to learn more?

Discuss your hedging needs with a StoneX professional. 

Hedging with futures

The StoneX price-risk management team helps clients lessen the risk of a loss in the cash market by taking an opposite position in the futures market.

The short hedge

We help our commodity producers and users utilize a short hedge to lock in a known selling price so that future price fluctuations will not matter for their operations.

The long hedge

We help our commodity clients utilize a long hedge to protect against rising prices so that input requirements are met regardless of commodity price volatility.

StoneX hedging clients

Farmers, livestock producers

Who need protection against declining prices for crops or livestock, or against rising prices of purchased inputs such as feed

Merchandisers, elevators

Who need protection against lower prices between the time they purchase or contract to purchase grain from farmers and the time it is sold

Food processors, feed manufacturers

Who need protection against increasing raw material costs or against decreasing inventory values

Exporters

Who need protection against higher prices for grain contracted for future delivery but not yet purchased

Importers

Who want to take advantage of lower prices for grain contracted for future delivery but not yet received

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Discover more insights

Dive into comprehensive market analysis from StoneX spanning commodities, equities, currencies and more.

Explore Market Intelligence

FAQ

What are common hedging strategies?

Common hedging strategies include diversification, future and options trading, and pairs trading. Diversification involves investing in multiple different assets, spreading risk across investments in order to help protect against market volatility. Future and options trading involves buying or selling an option on a security or commodity. The holder can then buy or sell the underlying asset at a certain price within a certain period of time. Pairs trading involves opening a long position in an undervalued asset while shorting on its overpriced counterpart. The trader stands to make a profit when the assets return to their original correlation rate.

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To learn more about how our customized financial solutions can help you stay one step ahead in the global markets, contact our team today.

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StoneX Commodity Solutions, LLC (“SXCS”), a subsidiary of StoneX Group Inc., trades in a variety of physical commodities, and oﬀers customers services to help manage the risks associated with their physical product. Trading over-the-counter and exchange-traded derivatives is not suitable for all investors and involves substantial risk. This material does not constitute investment research and does not take into account the particular investment objectives, ﬁnancial situations, or needs of individual clients or recipients of this material. You are directed to seek independent investment and tax advice in connection with derivatives trading.

StoneX Financial Pte. Ltd. ("SFP") (Co. Reg. No 201130598R) is regulated by Monetary Authority of Singapore and holds a Capital Markets Services Licence (CMS100476) for Dealing in Securities, Collective Investment Schemes, Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading, is an Exempt Financial Advisor under the Financial Advisors Act 2001, and is a Major Payments Institution (PS20200625) under the Payment Services Act 2019 for Cross Border Money Transfers.

StoneX Financial (HK) Limited ("SHK") (CE No.: BCQ152) is regulated by the Hong Kong Securities and Futures Commission for Dealing in Securities and Dealing in Futures Contracts.

StoneX APAC Pte. Ltd. (“SAP”) (Co. Reg. No 200616676W) is regulated as a Dealer (PS20190001002) under the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 for purposes of anti-money laundering and countering the financing of terrorism. SAP is an “Approved International Trading Company” authorized to act as a “Spot Commodity Broker” under the Commodity Trading Act.

SFP acts as an appointed agent for SFL's payment services business.