Global market movements influencing CBH Swaptions

CBH Grain offers a range of structured products to meet the diverse needs of Western Australian growers.

One of these, the CBH Grain Commodity Swaption, is a price risk management tool for wheat and canola which provides growers the ability to hedge their commodity price risk.

Like all CBH products, the CBH Grain Commodity Swaption operates within its prescribed Board approved limit framework.

The Swaption product is available to wholesale growers, and each approved grower is provided with individual tonnage limits and a credit limit.

Due to recent global market movements, such as the Russia-Ukraine conflict and India’s wheat export ban, there have been instances where some grower portfolios have reached their credit limits.

In those cases, CBH has been working with growers to ensure they maintain their portfolio within the credit limits provided. 

This has included presenting impacted growers with various options to choose from depending on their circumstances and preference. 

For example, options have included paying future settlement amounts promptly, rolling deep out-of-the-money positions into at-the-money positions, or closing out of positions entirely if that is the grower’s preference. 

In all circumstances, growers and consultants have elected their preferred approach to maintaining their portfolio within limits. CBH has not mandated a course of action for any grower.

Over the past week there have been comments stating that CBH is forcing growers to close Swaptions positions. CBH would like to re-confirm this has not been the case in any instance, and that in all cases growers have been free to choose their preferred course of action, which includes rolling their swap positions if they so choose.

CBH acknowledge the current circumstances are presenting affected growers with unexpected cashflow impacts due to unbudgeted settlement payments. We have been working with impacted growers as needed to present additional options to assist with their cashflow and working capital needs.