Price Risk Management

1
African Cotton Producers
Price Risk Management
A presentation to the European Commission Pairs
5-6th July 2004 Nigel Scott, Global Head
Commodity Financing and Hedging
2
"This information has been prepared for
information only and does not constitute an offer
or commitment. This information does not
constitute investment advice and is not intended
for the use of private customers as defined by
the rules of the FSA. Members of the Rabobank
Group trade on their own account and may from
time to time hold or act as market makers in
securities mentioned in this document, or may act
as advisors, brokers or commercial / investment
bankers to persons mentioned in this document.
Please note that no member of the Rabobank Group
makes any warranty, expressed or implied, as to
the accuracy or completeness of the information
and opinions herein. All parties are advised to
seek independent professional advice as to the
suitability of any products and to their tax,
accounting, legal or Regulatory implications.
Rabobank International is the trading name used
by Coöperatieve Centrale Raiffeisen-Boerenleenbank
B.A.  Rabobank International London Branch is
regulated by the FSA and De Nederlandsche Bank."
3
Rabobank, the largest financial service provider
in the Netherlands
Member banks 328
Members 1.4 Mio
AAA rated by Moodys and Standard and Poors
4
With a focus on food agribusiness outside the
Netherlands
Asia Bangkok Beijing Hong Kong Istanbul Jakarta
Mumbai New Delhi Shanghai Singapore Taipei Toky
o
X
X
X
Europe Amsterdam Antwerp Dublin Edinburgh Frank
furt Geneva Guernsey London Luxembourg Madrid Mi
lan Moscow Paris Poznan Utrecht Warsaw Zurich
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Australia New Zealand Auckland Sydney Wellingt
on
X
5
Commodity price risk management solutions

• Tools in the Toolbox

6
Cotton price management tools
Fixed Price Futs / Swaps
Price paid
World market price

• Requires credit.
• Can be done for African price of cotton with
  Rabobank Cotton Swaps, limited liquidity
• NY hedges liquid with some basis risk

7
Cotton price management tools
Price Insurance - Options
Price paid
World market price

• Does not require credit.
• World Bank / ITF CRM programme teaches and
  explains and help link with Price Providers

8
Proposal for a quick fix which is effective
Price Insurance 2 Options
Price paid
ITF Opportunistic Option
EU Catastrophe Option
World market price

• Does not require credit.
• Fits with World Bank / ITF CRM programme

9
Biographies
Nigel Scott Executive Director, Global
Financial Markets Nigel has been Global Head
Commodity Price Risk Management and Structured
Commodity Finance (OECD countries), two global
teams engaged in the trading of physical and
derivative commodity (Cotton, sugar, coffee,
cocoa, etc) transactions and asset backed finance
structures, for Rabobank International since
2001. He has worked for Rabobank International
since 2000. Nigel started working for Cargill
in Grain, NGFI and Vegetable Oil as a Merchant
(1991-1993) under Cargills Commercial Management
Trainee scheme, working as a grain and NGFI
commodity trader. He then became a Cotton Trader
for Ralli Brothers and Coney, UK, and Hohenberg
Brothers (1993-1998). Nigel then worked in
Cargills Financial markets Platform as a Senior
Structurer for Cargill Investor Services in 1998,
and started a number of Soft Commodity Swaps
derivatives markets, including cotton
swaps. Nigel frequently acts as an Arbitrator as
a member of the Liverpool Cotton Association, is
a Director of the Liverpool Cotton Association
and is a member of FOSFA and an arbitrator for
the L.C.A.S. Nigel obtained a BSC (Hons) from
Imperial College, London, in Microbiology.