Commodity Trading
(written in 2008)
The treasurer manages liquidity and fluctuating prices and has to support all departments concerned with his expertise and has to exert influence to protect the company's liquidity.
In times when commodity prices such as copper, oil and other commodities double and triple, Group Treasury is expected to support the purchasing department and/or sales department with hedging.
There are few financial treasury professionals with commodity experience. One possible reason; little commodity price volatility in the last 30 years? Many treasurers have valuable forex, interest rate and money market experience.
Martin Schneider was commodities trader at Bear Stearns in 1980s and before that at UBS as an FX, interest rate products specialist. Many Tomato clients benefit from this combined banking and commodity trading experience. Typical of Tomato: also how to process and correctly account for these products.
This belongs in every Treasury Manual / Policy.
For the purchase of commodities that are also traded on commodity futures markets, information and coordination processes are established between Chief Procurement Officer (CPO) and Group Treasury (GT) to leverage synergies and to achieve an overall view of the risk exposure to futures.
Cooperation between CPO and GT may work as follows: