Wheat hedge allows profitability even in periods of uncertainty

Faced with an increasingly challenging scenario for the Brazilian wheat market, the search for strategies to improve management is essential for the health and survival of mills. One of these mechanisms is hedging, a tactic to protect against large variations in asset prices for future purchases or sales. The topic was discussed during a webinar held by the Brazilian Wheat Industry Association (Abitrigo), this Wednesday (18), with the participation of representatives of mills from different regions of Brazil.

“Characterizing the competitive value at a level of knowledge will be the great guide for the market development of the sector”, highlighted the general superintendent of Abitrigo, Eduardo Wilson Assêncio.

Therefore, as Trigo's Risk Management Consultant at StoneX Brasil explained, Jonathan Pinheiro (in the photo), understanding this strategy allows the mill manager to master different operations, protecting the business and, consequently, reaping profits even in times of uncertainty.

“When we talk about hedging, we are basically referring to financial insurance with the objective of protecting production against the risk of price fluctuations, which makes it possible to search in the financial market for alternatives that mitigate bottlenecks in the physical market”, explained Pinheiro, highlighting the main factors causing difficulties in the current scenario: the remnants of the war between Ukraine and Russia and the Brazilian climate issue, alternating between peaks of rain in the South region and heat in the Southeast.

In practice, an objective strategy against risks must be devised, maintaining competitiveness between the industry, flour buyers, bran sellers and mills as a whole. “Hedge is not about making money. This is not the objective, but rather the protection and health of the business”, explained the expert.

Within the sector, there are two main strategic fronts: one focused on inventory, with an emphasis on protection in cases of price drops and on wheat already purchased, and another on the raw material acquisition process, with a focus on protection in upward movements. of prices and the wheat that will be purchased. Both, according to Pinheiro, are based on maintaining competitiveness.

“For everyone who is starting to work with hedging, it is very important to be a little more conservative and keep in mind that: if the mill buys wheat, it protects itself from downward movements in the market and if it does not buy, it protects itself from upward movements and changes in values”, he detailed.

However, for the initiative to function, it is necessary to have the support of a specialized company for operations on the Stock Exchange; and the continuous search for more knowledge and specialization. “By taking these points into consideration, the manager will not expose the business to unnecessary risks, reaching an ideal scenario, in which it is possible to define a hedging policy with percentages of protection and diversification of tools and actions that benefit the business”, highlighted.

Still for the professional, the movement “is the beginning of a journey that will take wheat mills to something similar to the development of the soy and corn markets, mature in relation to practice”, he concluded.