Cooperatives, or Co-Ops, enable groups of producers such as agricultural commodity farmers, soft commodity growers, feed yards, energy producers and cattle ranchers to consolidate their individual market positions into one larger position, which may enable a more effective market strategy. Private elevators and grain originators may also gain advantages similar to those provided to co-ops by the use of OTC instruments.
Co-ops may use IFM OTC instruments in order to:
- Hedge their down-side market price risk with OTC Lookalike options and swaps, while also taking advantage of OTC benefits.
- Take advantage of IFM’s initial and variation margin thresholds (if they qualify for them), which in some cases can act as financing.
- Find hedging strategies via OTC customizable options that enable them to manage their production with specific contract sizes, expiration dates and strike months.
- Embed unique pricing mechanisms into forward contracts, which enables them to increase grain origination.
- Pursue the ability to pass along to customers potential cost savings achieved through hedging.
Trading over-the-counter and exchange-traded derivatives is not suitable for all investors and involves substantial risk. INTL FCStone Markets, LLC (“IFM”), a subsidiary of INTL FCStone Inc., is a member of the National Futures Association and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. IFM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of IFM. Any recipient of this material who wishes to express an interest in trading with IFM must first prequalify as an ECP, independently determine that derivatives are suitable for them and be accepted as a customer of IFM. Trading over-the-counter (“OTC”) products or “swaps” involves substantial risk of loss. This is not an offer to buy or sell any derivative. 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.
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