Smart Foreign Exchange Alternative For Farmers
Smart Foreign Exchange Alternative For Dairy Farmers
A new company has been established that offers dairy farmers an alternative foreign exchange management to Fonterra’s foreign exchange hedging policy.
NZ Currency Concepts specialises in foreign exchange management and is offering dairy farmers a credible alternative to Fonterra’s conservative foreign exchange policy.
Currency Concepts Director Janie Elrick says the company combines specialist farming and foreign exchange knowledge to offer dairy farmers an actively managed foreign exchange product.
The former New Zealand Dairy Group General Manager Corporate Finance has teamed with Scott Healey, the former Head of Foreign Exchange at the National Bank to manage the company.
“We have been following the reaction to Fonterra’s hedging policy carefully and have undertaken some of our own research which shows there are farmers seeking an alternative. We intend to provide that alternative and also help generate greater understanding of Fonterra’s policy and what it means to dairy farmers.”
Mrs Elrick says Fonterra’s policy is a robust policy that delivers greater payout certainty to farmers.
“As it is 100% hedged on a rolling basis out for a 15-month period, it will have the effect of deferring the impact of foreign currency movement. This means farmers will have certainty of the foreign exchange impact, but the downside is that farmers won’t be able to benefit from a falling dollar for 15 months.”
She says this provides an opportunity for savvy dairy farmers to profit more from currency movements.
NZ Currency Concepts’ FX Dairy product offers a smart foreign exchange alternative to Fonterra dairy farmers. The product has been tailored to reflect farmers’ different appetites for risk and reward.
“What we are offering to do for dairy farmers is manage their foreign exchange exposure. This means we will actively manage currency positions on a daily, weekly or monthly basis to maximise dairy farmers’ return on the foreign exchange market.
“What we offer dairy farmers is choice and flexibility – they can put all their eggs in one basket with either Fonterra or ourselves, or they can choose to have some of their exposure with Fonterra and some with us.”
Mrs Elrick says to participate in their offering, farmers need to make a 5% credit deposit of the amount of exposure they want FX Dairy to manage, which will be held on behalf of farmers.
“The deposit enables us to access credit lines to effect the account management. The deposit will earn interest daily and be used, if necessary, to fund any losses made.”
She says there are no guarantees of the outcome and farmers need to be aware that the management of their foreign exchange could result in losses being made. However, the deposit made by farmers is the maximum amount of loss they could sustain, and therefore the extent of losses is protected. Gains made will be paid out quarterly.
“Farmers can also exit at any time, with one week’s notice, and will be paid any gains to date. They can also change the amount that is managed by FX Dairy – higher or lower – at one week’s notice.
“Our overall aim is to enhance dairy farmers’ returns by maximising the benefit from foreign exchange movements.”
Farmers interested in
learning more about FX Dairy and NZ Currency Concepts should
visit the website http://www.currencyconcepts.co.nz/