Asssessing the importance of FX risk when trading agricommodities. Determining Eurozone uncertainty.

1. Analysing the Business Case for
Developing Hedging Strategies for
Foreign Exchange when dealing
Agricultural Commodity Markets.
1) Assessing the importance of FX risk
management when trading agricultural
commodity derivatives.
2) Determining the impact of economic
uncertainty in the Eurozone
Eddie Tofpik
Head of Foreign Exchange
Price Risk Management for Agricultural Commodities
London – 27th June 2012

2. ‘If you are not hedging then you are
speculating!’
by Eddie Tofpik – according to Google if you type this in verbatim
(6 quotes….5 of them are mine!)
Is there a legal liability by not hedging?
The Example of the European Grain Markets…
Higher EUR vs. GBP = shipment of grains to Europe.
(Hedging with grain futures of course)
Lower EUR vs. GBP = shipment of grains to the UK.
(Hedging with grain futures of course)
Is this Grain Trader actually trading grains?
…or are they trading the FX Market?

3. Let’s assume you are actually hedging your FX
exposure!
Whether for Agricultural Commodity Derivatives
or for the underlying agricultural products!
What are some actual current & upcoming risks?

4. • Example 1) – Decree n° 6,983 published 20th October 2009 – Brazil.
……its impact on margin payments to the BM&F.
…repealed…but will some take advantage of it???
• Example 2) – ‘Dodd-Frank’ or the Dodd-Frank Wall Street Reform
and Consumer Protection Act – USA.
and the related…
• ‘EMIR’ or the European Markets Infrastructure Regulation – EU.
• The World in ‘blocs’!
• Example 3) - Tobin Tax (the famous quote ‘…lets say 0.5%...’).
• Economics described using ‘dead bodies in the kitchen’*
*Jerome Booth, Head of Research, Ashmore Investment Management .

5. Let us now have a quick look….
….at some actual FX examples.
First, the Euro!

10. NEXT…Chinese Yuan

14. NEXT…Brazilian Real

20. 2) Determining the impact of economic
uncertainty in the Eurozone
What did I say a year ago & how
relevant is it now?
my slide from May 2011….

21. Eurozone breakup?
or more likely
Eurozone breakup () …and other expletives!
• Has Spain escaped?
• Has Greece escaped?
• Have the German people let their Government escape?
• Will the new/next set of bank ‘stress tests’ be as
effective as the last?
• European crisis policy compared to the UK & the USA
– Economics explained using ‘dead bodies in the kitchen’*
• Eurozone stability – what is Asia Doing?
• Portugal + Greece + Ireland = Florida!
– (Michael Elliott - Fortune 2nd may 2011)
*Jerome Booth, Head of Research, Ashmore Investment Management.

22. What are the relevant points…
…now?

23. Eurozone breakup?
or more likely
Eurozone breakup () …and other expletives!
• Has Spain/Greece/italy (or anyone else) escaped?
• Is the 1st of January 2013 the date?
• Where would this leave Germany & others?
• Will Swiss exchange controls be the way of the future?
• European crisis – looking for one of three scenarios…
1) Muddling through!
2) Fast Grexit!
3) Slow Grexit!
• What plans are in place.
(Oct 2011, Mar 2012, Bloombergs blooper & currency printing)
• What the banks are saying?
• Eurozone – similarity to Italy in the 1970’s…and what occurred.

24. I am mindful that time
is short
so…..

25. here is the final bit!

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27. Eddie’s Crayons…
My Monthly Report FX & Commodities
Report
+44 20 7390 2952 (24 Hours)
eddie.tofpik@admisi.com