In today’s world economy, volatile commodity pricing is one of the greatest sources of uncertainty for businesses. Companies relying heavily on these raw materials often fall victim to unexpected price fluctuations, and their bottom line pays the price. This is where commodity hedging comes in, providing stability and resilience when external influences are unpredictable.

The first step? Understanding your market risk.

How is my business at risk?

This involves a critical assessment of predicted price trends and whether the supply and demand forecasts appear volatile. The most immediate causes of these fluctuations include major geopolitical events, such as wars, extreme weather conditions (more and more frequent as climate change takes hold), and wide-scale economic shifts, all of which impact supply chains across the board.

Just this year, we’ve seen the continued impacts of conflict in Gaza and Ukraine, Trump’s administration with tariff changes, and temperature records continue to be broken; you just never know what’s around the corner.

These price swing accelerators are not only unpredictable but incessant. There will always be something disrupting the markets, whether this is for better or worse. What’s most important is not trying to get ahead of the markets, but understanding the risk on the trading floor, and understanding the vulnerability of your own company in reference to these changes.

How does market volatility impact my business?

Is fuel your greatest input cost? It might be time you look at the impact the changing price is having on your hard numbers. Not being able to guarantee your input and outputs makes future financial planning an even greater challenge, let alone from month to month. Neglecting your risk profile could impact:

• Reduced Profit Margins
• Increased Operating Costs
• Competitive Pricing Difficulties
• Reduced Cash Flow
• Inability to Invest in a long-term Strategy
• Worst-case scenario? Liquidation

How can hedging help my business?

For producers like farmers, oil drillers, and mining companies, a short hedging strategy can be a protective way to lock in a minimum selling price and shelter against sudden market price drops. Where as a long hedge is typically more beneficial for businesses that need to secure a future purchase price for a key raw material. Ultimately, commodity hedging is a highly specific tool, but it can work in different ways for businesses of all sizes.

Across the fuel, metal, and agricultural markets, a perfect storm of volatility this year has made managing procurement costs and supply chain stability a major challenge for businesses of every size. For anyone involved, mastering price risk management is critical to protecting your bottom line.

Find a financial strategy that lets you see and secure your future today. Contact us to find out more about how we can support you today, or try our Explore Zone, and see for yourself what our tools can do (no strings attached).