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 SXM 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 SXM’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.