HOW ATTARA SUPPORTED A LEADING UK DAIRY PRODUCER IN LOCKING IN ITS PRICES
Current volatility in input prices is challenging dairy farmers. Unpredictable weather conditions and fertiliser prices in flux – to mention a few factors – are preventing dairy farms across the UK from knowing their cost of production from month to month. How can you crunch the numbers if you don’t know what you’re starting with?
Even once produced, farmers don't know what margins they’ll be working with; the price per litre is not reliable either.
So what’s the solution? We worked with one of the largest UK dairy producers to reduce their exposure to risk and lock their prices, so that they could focus on the task at hand.
Monthly trades in litres
priced in pence per litre
Exposure
over one year
THE CHALLENGE
Operating in over 100 farms across the UK, with additional presence in Europe, the client produces 19 million litres of dairy products annually. The scale they are operating on is huge; there is no room for volatility risk when the smallest change in input costs could cut margins by potentially thousands.
The crux of their success was securing a fixed price for milk production, regardless of market volatility. As well as this, they needed to lock in favourable margins above production costs to support long-term business planning, which had been made near-impossible in the current climate
OUR ACTION
Attara experts implemented Forward Swaps with monthly settlement denominated in GBP, whilst our hedge structure is built on correlation with the German BLE against EEX liquid milk futures (a 97% correlation to UK milk prices).
With this structure, we managed to secure a fixed price of 43.97 pence per litre (ppl); every month, the benchmark prices are collated and averaged, forming a settlement price, which is then compared against your fixed price.
This way, the client knew that the value of their produce was locked in, allowing them to plan with certainty.
THE RESULT
Attara executed trades that hedged approximately 10% of the client’s exposure over a 12 month period. Locking in a pence per litre price that the client was happy with, removing price risk for their chosen quantity.
Going forward, we’ve also established a scalable framework with opportunities for expanded coverage going forward. By reducing their risk exposure, this company has set itself apart from competitors who are left grappling with volatile prices and can focus on what matters most, running their business.
SPEAK WITH A SPECIALIST
Industries We Support
Our hedging strategies benefit businesses in sectors such as:
– Logistics
-Fuel providers & distributors
-Farming
-Retail & Waste Management
-Manufacturing
-Civil Engineering
-Utilities
-Aviation & Maritime
Act Now to Take Advantage of Market Lows
With fuel prices at a multi-year low, the opportunity to secure cost certainty won’t last forever. Taking proactive steps now can protect your business from future volatility, ensuring more predictable cash flow and operational stability.